Selling Rent To Own FAQs
Q: What exactly is a Rent To Own?
A: You rent the property out to a buyer but they have the option to purchase the property within a specific timeframe.
Q: Why does someone opt to sell rent to own versus an outright sale?
A: Here are a few reasons I have seen in the past on why sellers to sell rent to own: they are in the business of selling rent to own homes, tax purposes, equity purposes, slower market conditions, sellers wanting to give addtional financing options, etc.
Q: Is there a down payment (option consideration) that is collected?
A: It will depend on the home, the buyer, and the seller. The option consideration needs to meet the needs of both the buyer and the seller but I have typically seen about 1-10% of the sales price upfront.
Q: What is the criteria sellers typically use to select the Rent To Own buyer?
A: Factors include the amount of upfront option consideration, date of move, income level, situation, and the timeframe for purchase.
Q: Will the option consideration be counted towards the purchase of the house when the option to purchase is exercised?
A: Typically yes.
Q: How long is a Rent To Own term set for?
A: The option period means that the buyer has an option to purchase the property within the amount of time the option period is set for. Some sellers will provide a short-term option period and others opt to give many years. The shortest terms our sellers have given is 6 months. The longest we have worked with has been 5 years.
Q: Once a seller and buyer agrees to this type of purchase, what is collected upfront?
A: Typically the option consideration, security deposit, and first and/or last month's rent.
Q: Is the purchase price of the house determined upfront?
A: Some contracts have the price stipulated upfront. Others choose to determine a fair market value at the time of purchase sometimes through an appraisal or a comparative market analysis.
Q: Why does someone opt to buy rent to own versus an outright purchase?
A: There are many reasons why a buyer might want to buy rent to own versus a convetional purchase. Here are a few I have encountered: self-employed and do not have the documentation for a bank financing, prior dings on credit scores, prior bankruptcies, the necessity to sell and close on the buyer's other home before they can purchase a new one, the necessity to save up more down payment money, etc.
Q: How can I get more information about selling rent to own?
A: Call Heeran Workman for a free consultation. She started her real estate career as a real estate investor and has extensive experience structuring rent to own transactions for her own portfolio as well as helping other sellers.
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By: Heeran Workman, MBA, Realtor - eXp Realty Omaha NE Real Estate
