Rent to Own - How Does it Work?

 

Rent-to-own can sometimes be a great alternative for both seller and buyer. Some buyers may not have enough cash saved for a down payment or they may be working to improve their credit but can’t get the loan they need. Some sellers may find themselves unable to sell their home when they’ve purchased a new one. In these cases, rent-to-own, sometimes called lease-to-own, may be the best option.

With a rent-to-own option, renters pay a certain amount each month to live in the home, just as they would with any rental. However, at the end of a predetermined period – usually within three years – the renter is given the option to buy the house. Each month of rent becomes income for the seller, while a set portion of the rent goes toward a down payment to eventually purchase the house.
Renting-to-own has advantages and disadvantages for both parties, so the contract for this type of transaction needs to be detailed and clear to all parties involved.
Seller Advantages/Disadvantages
    •    Sellers who have already purchased another home will have relief from paying two mortgages at once.
    •    Sellers can use the rent they collect to pay the existing mortgage on the old home, which can ease the financial burden.
    •    Renters who sign a rent-to-own agreement generally treat the home and community better than other typical renters since they plan on staying in the home long-term.
    •    If a renter does back out at the end of the agreement period, the seller gets to keep the option fee and rent premiums as income. However, the seller is then back to square one and will need to either find different renters or try to sell the home.
    •    The seller decides the sale price and monthly rent amount. These amounts are subject to negotiation, just as in any other real estate transaction, but once the amounts are set and a contract is signed, the sale price is locked in until the end of the rental term. Even if the market changes, the agreed upon amount is final.
    •    At the end of the rental period, the buyer still may not be able to buy the home for the same reasons they couldn't buy at the start of the lease, such as bad credit, insufficient down payment, or not enough income.
Buyer Advantages/Disadvantages
    •    Buyers who don’t have a large enough down payment or those who may not have good credit can often choose this option and take the extra time to save more money and/or repair credit issues while they rent the home.
    •    Buyers pay an option fee, which will become part of the down payment. Also, a portion of the rent generally goes toward the down payment.
    •    In most cases, buyers still have the option to not purchase the home at the end of the agreement; however, the seller will keep the option fee and the rent premium.
    •    If the buyer is just one day late on a month’s rent payment, most agreements void the rent credit for that month, so rent must be paid on time every month.
    •    If the seller fails to pay the original mortgage on the house, it may be foreclosed and the buyer will be forced to move.
Because of the many details and concerns on both sides of the rent-to-own transaction, both buyer and seller should obtain the assistance of a real estate attorney (two different attorneys) so that each party is fully aware of their rights and responsibilities.

Categories: Contracts/Legal, Finance, General Real Estate, Helpful Tips, House and Home, Loans, Markets/Economy, National Topics, New Trends, Other, People, Real Estate News, Real Estate Practices, Service/Services

Presented by Cobblestone Realty LLC, South Florida Real Estate

What Real Estate Agents Wish You Knew

For Buyers:

1. When looking to buy a home, do not get any new loans or use credit cards heavily.

The preapproval letter is just the beginning of the process. Once you get preapproved, don’t run out to start buying things for your new home on credit. Just before closing, most lenders will pull your credit again to re-examine your financial situation. If your credit has changed since the preapproval, you may have a higher interest rate, or even worse, you may not get the loan. It’s best to maintain your frugality even after living in the home for a few months to get an idea of how much it will cost you to live in your new home.

2. Prequalification does not mean preapproval.

In a prequalification, the lender generally doesn’t verify all the buyer’s information. A preapproval required third-party verification. If you are a serious buyer, get preapproved before looking at homes. That means you’ve already applied for the loan, your financial information has been verified, and you’ve been given a specific loan amount and interest rate.

For Sellers:

1. Selling a home usually takes longer than you think.

Most people underestimate the time it takes for a house to sell due to unrealistic expectations. These unrealistic expectations can often cause more stress. Make sure you communicate your expectations with your real estate agent then be open to suggestions and advice and a more realistic timeline. Give yourself a minimum of four to six months to sell your home.

2. The little details make a big difference.

Your home needs to look good, feel good, and smell good when you are preparing to sell it. The home should always be ready to show. Messy rooms, poor staging, and odors will turn prospective buyers off quickly. Always leave a warm, comfortable, and inviting impression.

Categories: Service/Services, Real Estate Practices, Real Estate News, People, Other, Opinion, New Trends, Markets/Economy, Marketing, House and Home, Helpful Tips, General Real Estate, Advertising



Brought to you by Cobblestone Realty

Seeing a Homes Potential

Shopping for a home for the first time can be very exciting. You have a list of “must-haves,” and you think you know exactly what you want and how your new home will look.

The only problem with this approach is that there are sometimes gems that get overlooked due to bad decorating, a neglected yard, or dated carpet and walls. If you can’t see past some more minor details and quirks of a home, you may be missing out on a home with great potential.

We are no longer in a buyer’s market, and many homes are being sold as soon as they are on the market. Being too picky might mean missing out, so learn where you are willing to bend a little on your expectations.

Qualities that can make a home a good investment:

Great Location
You will get a better return on your investment if you find a home that doesn’t necessarily have everything on your must-have list in a great neighborhood than any home in a less desirable neighborhood. Low turnover in a neighborhood is a great sign. Ask around and do your research to determine whether the home is in a good location.

Simple Upgrades and Cosmetic Changes
The home may not have granite countertops, stylish cabinets, or new carpet, but it might be a beautiful home in a great location with a great yard. Look at the cosmetic aspects of the home that you may be able to change or overlook. Envision what the house could be. Ask an interior designer or professional remodeler for their opinions.

A Desirable Floor Plan
Find a home with a basic layout that you like. The floor plan is one of the most important things about your home. If the floor plan isn’t exactly what you want, consider whether you can rearrange it, add on, or remodel at a low cost, and determine if it’s worth making an offer on the home.

Categories: Finance, General Real Estate, Helpful Tips, House and Home, Markets/Economy, National Topics, New Trends, Other, People, Places/Spaces, Real Estate Practices

Stage your home to Sell

The decision to buy a home is often made within 15 seconds of walking through the front door. To make a great first impression, and to ensure the best price for your home, consider home staging. Home Staging is the process of setting the scene throughout your home to create buyer interest.

Benefits of Home Staging

Studies show that home staging often results in a higher price than homes that are not staged, all other things being equal. The money that you invest in staging usually results in a high return on investment in terms of getting a number closer to their sale price..

Clean Up and Remove All Clutter

Potential buyers don’t want to see how you live. They want to picture themselves living in your home. When cleaning for home staging, clean every surface including windows (inside and out) and window sills, ledges, door knobs, ceiling fans, shelves, mini blinds, ceiling and floor corners, and baseboards. Remove all tile grout with bleach. Caulk areas around sinks and bathtubs. Consider hiring a maid service to ensure a thorough cleaning. The benefits of home staging will be worth the cost.

Get your carpets professionally cleaned, especially if you have pets. Even if you don’t, professionally cleaned carpets are far more appealing than worn out, stained ones.

Potential homebuyers will open your cupboards and closets. Make sure they’re organized neatly. Every storage area in your home should be neat, clean, organized, and clutter-free.

To Decorate or Not to Decorate

You need to show your home at its best potential to buyers. You are selling your home, not what’s inside it. Remove rugs, eliminate clutter and knick-knacks, and cut down on furniture. Take down your wedding photos, religious items, school pictures, and collection of refrigerator art. Rearrange furniture so it is conducive to a smooth traffic flow. Make the rooms as spacious as possible.

Consider replacing the towels in your bathrooms and kitchen with a couple of fresh new ones. Remove all personal items from countertops, and place a plant on the bathroom vanity. Remove all dirty laundry from sight. Add a centerpiece to your dining room table if you don’t already have one. Place plants in clean, attractive containers. Add a fresh, non-offensive fragrance to your home using potpourri, scented oils, or scented wax (as candle smoke can stain walls) such as cinnamon or vanilla. Many agents are even advising homeowners to bake a fresh batch of cookies if they know they will be showing their home.

A fresh coat of paint in a neutral color will also go a long way.

Your front porch is the first thing people see. If you have any dead or tattered planters, replace them with fresh ones. Keep all planters watered and trimmed. Keep your porch clean and inviting. Replace your front door handle if necessary, and put a stylish wreath on the door.

Home Staging can be a project you can do yourself, but if you want to invest in a professional Home Stager, the benefits are often worth the cost.

Categories: People, Other, Opinion, New Trends, House and Home, Helpful Tips, Real Estate News, Places/Spaces, Service/Services, Real Estate Practices, Competition, General Real Estate, Advertising

Signs that you have outgrown your house

Once you’ve tripped over your kids’ toys for the 50th time or have to store pantry items in your linen closet, you may start dreaming of moving to a larger house. But how do you know if you’ve really outgrown your home?
According to Barbara Sukkau, a past president of the Ontario Real Estate Association (OREA), many homeowners start eyeing property listings after they’ve reached a new life milestone. “Homeowners tell me that their house feels too small after another child joins the family or when an elderly parent moves in. To them, it can feel like their house has more people in it than closets,” Sukkau says.

Sukkau recommends homeowners meet with a realtor to determine the value of their current home and decide what price range they can afford for a larger house. “Once you know your budget, your realtor will know whether or not you can find a larger home within your price range in the neighbourhood you want.”

While some homeowners renovate to solve their cramped-quarter issues, this is not always the best solution. “Some municipalities prevent you from building an extension onto the home or from adding an apartment in the basement,” Sukkau says. “Living through an extensive renovation is stressful, especially when you have kids. A realtor can help you sell your home for the best price to make it easier for you to buy your next home. You may find the perfect house already exists and you won’t have to try to build it yourself.”

OREA points out some other signs that it may be time for you to move:
- Your kids can no longer share a bedroom comfortably.
- Belongings you want to keep are stuck in a rented storage unit.
- You now work from home and need an office that’s quiet and clutter-free.

A realtor’s extensive training can help homeowners decide if it’s time to move or not. Realtors, who are regulated by the province, work for your best interests. Visit HowRealtorsHelp.ca for more helpful information about selling your home.