GREAT SOLUTION FOR INVESTORS AND REALTORS IN HOWARD COUNTY

As Investors and Realtors in Howard County, you know that your job is to protect your clients. Do you know that there is a increasing number of people who are in or almost in foreclosure and are offering their homes up for a rent to own? The idea is that they collect an upfront option fee and then they are nowhere to be found when the new tenant finds out that the home is being foreclosed on. Don't let this happen to your clients! Require verification that the mortgage is current before they move in! Additionally, it is a good idea to structure the contract to require verification that the mortgage is current on an ongoing basis.

While these are isolated incidents, the rent to own and rent to sell markets in Howard County are alive and well with possibilities. Investors and Realtors are in a unique position where they are able to please potential buyers and sellers in Howard County.

ADVANTAGES FOR YOUR HOWARD COUNTY BUYERS/RENTERS

The primary reason why a rent-to-own agreement appeal to buyers is simply a financial one. If buyers don't yet have the down payment or the monthly income to qualify for a home loan but believe they will within the next couple of years, a lease option allows them to accelerate the path to homeownership. By signing a contract now, the buyer locks in a purchase price, which means no worrying about rising home prices. (Note: In a rapidly appreciating real estate market, the seller of a lease-option property would probably want to add a clause to the contract allowing for the price of the home to increase with the market.)

The buyer also does not have to worry about coming up with the money for Howard County property taxes or homeowners insurance, and the seller will usually continue to pay for and complete any maintenance and repairs on the home (unless stated otherwise in the contract). Finally, by living in the home before deciding to purchase it, a buyer has the advantage of a lengthy test drive on the home before jumping into a major financial commitment. Best of all, if the buyer decides to walk away from the deal, the only consequence is the loss of that portion of the rent paid that was above market rate plus the options fee. If the buyer ends up purchasing the property, the seller will credit part of the rent back to the buyer, often more than the portion of rent that was above market rate.

Option Fee and Rent Premium

Renters also have to pay an option fee and then a rent premium. The option fee is a set amount that the renter pays the seller. If, at the end of the lease period, the renter buys the house, the option fee becomes part of the down payment. If the renter doesn't buy the house, the option fee becomes income for the seller. Rent premiums are an amount slightly above the typical rent, with a portion of that money going toward a down payment.

Besides viewing it as just another financing option, the rent to own process is perfect for the prospective home buyer who might have trouble qualifying for a loan. Many Lease-Purchase programs allow the occupancy of a home for up to 12 months prior to purchase, allowing the buyer to save for a down payment on the same property if he or she is facing credit issues which might otherwise make buying any home impossible. Normally these lenders require a 3% to 5% down payment of the purchase price.

Purchasing The Property After The Lease Option Agreement

When you do decide to purchase the property, the seller will credit part of your rent back to you, usually more than the portion of your rent that was above market rate. You can put this money toward a down payment and closing costs, or keep it. The purpose of the above-market rent is to give the seller an incentive to complete the transaction. If you do not purchase the property, all of the rent you paid remains with the seller, giving the seller an incentive for taking the property off the market during the time you were renting it.

Also, be advised that option consideration is not a security deposit. It is a non refundable payment toward the purchase price and is 100% credited toward reducing the price of the home. Giving back rent credit helps a family to buy a home more quickly than they could trying to save 10% or 20% to put down on a new home purchase, allowing them a head start toward building equity.

Finally, any who take advantage of the rent to own process in Howard County find it worthwhile if for no other reason than the peace of mind achieved. Tenants have full control of the home and can maintain it or improve because it will be yours when they exercise their option to buy.

ADVANTAGES FOR YOUR HOWARD COUNTY SELLER

Higher Rent: You can ask for a higher rent payment because you are flexible on your financing terms. One of the main reasons for charging a higher rent is because part of the rent goes toward the purchase price of the house. Decide how much of the lessee's monthly payment will be credited toward the option. Anywhere from 0-100% of the monthly payments can be credited toward the purchase price, although the amount is sometimes subject to state or local laws. In general, the monthly payment will be calculated at fair rental value plus a set amount that will go toward the purchase price. This, like the initial option money, will either be credited toward the down payment or the purchase price or, if the tenant doesn't buy, will be forfeited to you.

Minimum Risk: The non-refundable option deposit is kept by the seller should the renter default or decide not to buy. Decide on the term of the lease. Lease options typically run anywhere from 6-24 months. Less than six months usually doesn't make sense for the buyer, and more than 2 years (sometimes more than 1 year) may cause tax or legal complications. Shorter lease terms generally result in sales more than longer terms, simply because there are so many variables over the long term, but the length of the lease should be adequate to ensure that the lessee has time to get his or her financial ducks in a row. Keep in mind that if housing prices appreciate quickly, you may be getting a bad deal on a long lease, since you're obligated to sell at the agreed-upon price. If housing prices decline, however, you may be getting a good deal, but if they've declined significantly, the lessee is unlikely to buy the house. You still get to keep the option money, however.

Don't always need a real estate agent: The most attractive feature of this kind of deal is that the agreement is based on a mutual understanding between both the buyer and seller and therefore the terms are flexible. The period within which the rent to own houses option has to be exercised is open and both could discuss and decide upon what the time period should be to give the buyer the option of buying the property. Unless the seller lists the rental with an agent which could be helpful to attract attention, the seller is selling the home by owner. This will save on fees.

CONCLUSION

For the Realtor and the Investor in Howard County, the above advantages create a great opportunity to please buyers and sellers and at the same time make some money.

1888ownlater offer realtors and investors training, leads, as well as automated marketing platform. Now is the perfect time to enter into the Rent-To-Own & Rent-To-Sell Market. Buyers have a difficult time securing adequate financing and Sellers are having a difficult time selling properties at retail prices... Hence, the perfect win-win solution is to offer an option that will bi-pass the buyer and seller hurdles!

Using the Rent-To-Own & Rent-To-Sell systems as transactional options allows buyers and sellers to solve their problems. You close more deals and your clients look at you as the "savior"!