Saturday, January 5, 2008

Discussion on Rent to Own for Sellers in a Down Market

Hopefully you have had the chance to read yesterday's posting. If you are having trouble selling your home in a down market, this could offer a wonderful opportunity. The hammering of the sub-prime market and the drying up of loans to underqualified buyers obviously has added to the current conditions. This does, however, open up more of a market for the Rent to Own buyer who needs time to save money or improve their credit scores to qualify for a better loan.

We have had a number of sellers who have stated that if they did not sell the home in a reasonable amount of time for a reasonable sale price they would just rent the house for a year or two and see where the market goes. That's a very iffy proposition. The rental market is also soft and that means lower rents received. Add that to the expense of renting - real estate commissions, maintenance, insurance, depreciation and worst of all the condition of the property at the end of the lease term. You could be lucky and get a tenant who takes care of the property and who pays their rent on time, or you could get the opposite and it could get costly. There's also no guarantee that after the lease term the market will have improved or appreciated.

If you could sign an option for full asking price (that in itself is a bonus), get a 1% to 5% option fee and rent the property for several hundred dollars over the going rate, that could be a pretty good deal! It's a good deal for the buyer, too - rental payments are generally less than mortgage payments, they have time to get a "feel" for the home and neighborhood, they build equity (remember, the option fee and the premium on the rent would apply to the purchase price if the option is exercised), and chances are they will respect the house as if it were already their own.

We do a rent versus sell analysis (spreadsheets we have developed ourselves) that is truly an eye-opener to homeowners. You can do this analysis yourself, but you might be better served in seeking the help of an unbiased professional. I know many realtors will do this for you and they have the knowledge of the market and know the costs and pitfalls as well.

So, just some other options and opinions for your informatioin!

BE INFORMED AND CHECK BACK HERE OFTEN

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