You may have heard the term “rent to own” or “lease option” or “lease purchase” when it comes to buying a home. The legal instruments used to arrange that type of transaction have changed over the years, but ultimately the purpose is the same; home buyers arrange the home purchase with the seller, outside of traditional financing in order to secure a home when they might not otherwise be able to obtain financing.
In these rent to own scenarios, a property owner and tenant agree that, at the end of a specified rental period for a given property, the renter has the option of purchasing the property. The terms, with regard to the amount of deposit, whether or not a portion of the payments go towards the down payment or reduce the sales price or how much the property will be purchased for at the time of exercising the option, are all up for negotiation.
In today’s market, there are not many sellers whose current mortgage terms allow them to do this and there are fewer sellers who own their property outright. Therefore this is not very common. There are schemes out there involving so-called wraparound mortgages, a type of creative seller financing that is legal in Texas. But critics say they are too risky and invite fraud and theft. Lawyers representing local victims say many of their clients have had their credit ruined and their savings wiped out. Many buyers and sellers have fallen victim to this scam, where a third party (A) convinces the seller (B) to sell their property to a buyer (C) brought by the third party (A). Basically A creates a wrap around mortgage on B’s property and takes over making the payments on B’s existing mortgage. C makes payments to A, but A doesn’t pay B’s mortgage as promised. Eventually the property will be foreclosed, B’s credit gets ruined and C gets evicted and loses all the money they paid.
You may be able to find owner financing on a home that is paid free and clear and the seller feels like they can take the risk of acting as the lender. An attorney should draw up these documents. It’s all perfectly legal, but opportunities like this would be few and far between as most people just want to sell and take their equity and move on.
The good news is that there is now a legal, trustworthy and completely transparent way to get into a home, as a tenant, and eventually buy that home at an agreed upon price.
Through a RE/MAX Approved supplier, Home Partners, responsible households are provided with a transparent path to homeownership through its Lease with a Right to Purchase Program. If you are still working to rebuild your credit, save for a down payment, or need to have two years self employed tax returns under your belt before you buy, this is a great program for that transition period. It’s also great for people moving to the area who are waiting for their house to sell elsewhere.
Basically, with the assistance of your Realtor, me, Christina Legrand, you will find a home listed as an approved property through Home Partners. These are homes that are currently on the market being sold by regular sellers. Home Partners buys the property from the seller for cash. They then become the landlord and you, with a refundable deposit paid, will rent the from Home Partners for up to 3 years. After year one, you can purchase the property at a predetermined price or continue to rent. The amount of the rent and the amount of the purchase price are all spelled out ahead of time so there are no grey areas.
There are pros and cons of course and everyone’s situation is different. If you would like to meet and discuss this program and if it’s right for you, please call me at 512-966-6540 or email me at email@example.com
If you would like more information about how this works, CLICK HERE.