Rent to own – Explained

As Vancouver Real Estate agents, we have experienced so many pros and cons of rent to own we believe we have many things we can share with you folks in the US. When you do a rent to own the tenant pays the steady rent on the home , but adds monthly $300 more for – for a term of about say 4 years – at the end of which the owner grants him a a right to purchase the house at a set market value . The $300 over 3 years or $10,800 is applied to the purchase price (in most cases the renter now also qualifies for a low down payment mortgage ). If he does not execute the option, the ‘premium/overage’ of $10,800 is forfeited to the owner (after all he had to wait 3 years to find out). As a seller you should only do such a thing if you do receive an excellent price!

How to actually do it?

It depends, but there are hundreds of ways  We have seen the buyer  sign a complete Contract of Purchase and Sale. There is an addendum to the contract that lays out that a certain portion of the rent goes towards the purchase if the tenants complete the contract. It also specifies that failure to pay rent or meet other terms such as an increase of deposit will cancel the contract. The amount of the surcharge , of course, is at a premium to market rent and usually the amount credited to the purchase is that amount of the surcharge . In almost all cases, if the renter fails to honour the surcharge, the premium goes to the seller.

But, never, ever transfer title of your property with ‘no money’ down to anyone – if you are a purchaser yes! But if you are selling NEVER! . The only constant is change. Your renter loses his job, follows the lure of the wild, discovers the joys of his secretary and there you are. To take your house back from a lazy buyer that has no equity in the property is VERY COSTLY !

The most important factor is to have everything in writing. Having things in writing won’t make bad people good and won’t make good people better; all it does is delineate the parameters of any legal action. You never want to take legal action if you can possibly avoid it. But a strong rental agreement allows you to make convincing threats.

Why do it? Owner/Investor benefits:

( The following is for Renters – show this to your owner )

• Best price in tough markets (perhaps in today’s market in some cities where there are a lot of bankruptcies ?). Get the property at market economic value or better. You also have more tenant/buyers who are amenable to pay a premium because of the terms.

• ABOVE AVERAGE rental income. Increase positive cash flow.

• Higher rental cash : It is one way to make a property have cash flow that otherwise would not.

• Non-refundable option or ‘premium – overage of rent’ up front.

• Avoid a commission: Although there are ways to pay a Vancouver realtor as well. ( Not much competition…most Realtors don’t understand it – and some lawyers!)

• Lower advertising costs. Run an ad for rent to own in today’s market and see what happens!

• Get a better quality tenant : Someone who wants to buy , even if in the end he does not end up buying, will treat your place better . There could be quality people in the recently divorced, self employed or new immigrants.

• Less maintenance : Less management. Tenants that feel a “pridefulness of ownership” will pay on time, execute maintenance, and work on the front lawn your home. You could also term these monthly obligations as a condition into the deal.

• Many more buyers: You are disseminating the base from buyers only to renters/investors.

• Fewer Vacancies : Your phone will ring off the hook when you post your property as a lease/rent to own purchase system

Write a great contract. Legal documents are far more complex. Have a lawyer/notary or a Vancouver real estate agent witness it. In a falling market the tenant WILL want the option price and rental premium back. I guarantee it!

Also , sellers should whenever possible make very good use of a “rent to own” agreement rather than a contract of purchase and sale in homes that are far away, say around lower than $50,000. It is a real hassle to foreclose on a buyer who failed to pay the rental fee. It is much easier to simply cancel their contract.

 Why do it? Tenant/Buyer Benefits:

• Grow equity. Sometimes a family cannot get together a down payment.

• Knowing what you will buy. Checking it out for say 2 or 3 years, having the price fixed.

• Rent money is not wasted . Each month a portion of rent comes off of the sales price eventually.

• The full option deposit is not lost. This money will be 100% credited to either the D.P. or the sales price.

• No huge initial capital infustions . With a lease purchase, there is only the first month’s rent and an option deposit to pay; no down payment, no closing costs.

• No other down payment required. The option deposit plus the rental rebates will likely take care of the whole down payment.

• Assign the contract. Wherever imaginable, get the right to assign the contract. If the market goes up, you could assign the contract for a tidy profit.

• Increased buying power. Your buying power is dramatically increased.

• Less credit problems. Qualifying is not as strict as conventional financing.

You will be approved at the sole discretion of the landlord/seller. You will have time to repair your credit, and find the best way to restructure your financial state once again!

 
Check it out! You have full control of the home – and all the time in the world to see if its really worth it! . 

It is of utmost important to have a perfect and enforceable contract of purchase and sale. Make sure you get a lawyer and pay the upfront fees. Trust me, you will not regret it! If the market changes in any way , the owner WILL try to get out of the deal. Always!! You always have more advantage as a purchaser With a lease purchase contract, you have the capability of manipulating real estate that commonly require 10-30% down payment for a nominal amount of money without using a lender or going through the loan application process. Yet you get all the benefits

Why You Should Take Out A Mortgage Right Now

Perhaps the biggest dream for all of us is to live in our own home. Your mortgage payments almost always cover most of your income. Still, it’s worth having mortgages to enjoy your piece of heaven.

Ask anybody and they will all say that rent money is like dead money. There is no return and you are not paying for something that is yours. Comparing renting and buying a house, your own house is always the best.

When interest rates are varying drastically and in the favor of customers, you must take advantage of it. They even change many times a year. When the country is going through economic crisis, interest rates are very attractive. So either you go for fixed or variable, you benefit either way.

Experts always say to make the best of such good times as good times do not last long. Hence for mortgages, now is the correct time. If you postpone it to later, its more pressure as to come towards your retirement.

There are many banks in the market who compete to offer you the best loans and features. They have different types of loan with offset accounts, debit cards, refinancing option, changing the fixed to variable and so on.

So you have many choices to choose from and can go for a mortgage that best suits your needs and your ability. So you can go through all and then choose the one you like.

Mortgages are ideal if you want to buy a house for your family. That’s how it all starts. You could save up for a house deposit and then look for a house. If you have a full time job, then it’s easy to get a mortgage. LenenInformatieCentrum.nl writes about comparing loans in the article vergelijken van leningen which is written in Dutch.

Mortgages are a long term investment, but at the end, a house is the biggest asset you can have. You do have a commitment to pay in installments, but it’s your house and you can do everything you want.

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  » Double Mortgage Payments Is Stressful – But Fixed With Rent To Own Sales

With the foreclosure rate at an all time high, how are average citizens managing their options in this very odd real estate market?

Values on homes have slid 20-50 percent or more in some areas from their highs set a few years ago and unemployment in various places around the country is above the ten percent mark. Nationwide, more than a third of mortgage holders owe more than their houses are worth. More than an eigth of all mortgages are behind on their payments or in default on a nationwide level.

If you are in danger of defaulting on your home loan, you have only a handful of avenues to go: a loan modification, a foreclosure or a short sale. A lot of the advise you will get these days would point towards the short sales, because they offer a benefit to real estate agents, lenders and buyers. But are short sales the best option available to the actual home owner?

Often times, it really is not the best option to pursue, even though others working with you during this time of need might like you to think otherwise.

Let’s look at this in more detail.  So you are struggling to make mortgage payments. What happens should you suddenly stop paying?

First, it will really hammer your credit score. That score is needed to show to future lenders who might decide at some later point if you are worthy of making a loan to, which might require you to work with  hard money lenders in the future. Also, your credit is also being used by employers who may be making a decision on whether or not to hire you. Deciding to move forward with an action that can ruin this score is something you really need to consider carefully.

The score itself is calculated with secret and company owned methods using information that has been compiled over time, encompassing your entire borrowing life.  A spokesman for Fair Issac Corp., which maintains the FICO scoring system, says its purpose is to predict how likely the borrower is to default during the first two years of a loan.

There are a number of other companies out there other than the big three reporting agencies that have their own scoring models, most running numbers between 400 and 990.  If you stop making payments on all of your loans, most of these formulas will drop your score below the 600 mark.

If you have a credit score of less than 600 in today’s lending environment, getting a loan for any purpose can be impossibly hard (unless you are looking at going with private hard money lenders ).  If obtaining a loan in the near future is a goal of yours, a short sale of your house will not save your credit, contrary to what many in various industries might tell you.  So what is the benefit of short selling your home?

The main benefit is getting rid of the large debt of your home and the drag it has on your finances, and keeping your credit report foreclosure free.  A short sale can impact your score about the same as a foreclosure, but by short selling your home, you will be allowed to get another real estate loan in about 2 years time, rather than 3 or more that a foreclosure will require.

You may want to consider looking into a potential modification of your existing loan .  This can be a tough process to deal with, but if you need to stay in your house and save your credit, a loan modification may be a good option to look at.

You have to do your own due dilligence before you decide what direction or option you are going to take.  Depending on what state you are in, there will be different ramifications for the various options.  Locate a good real estate agent and/or real estate attorney, make an appointment, and talk about all your options before you make a decision.  If you decide that selling is the way you are going to go , find a close realtor who is also a specialist .  For example, if you live in the Walnut Creek area, you will want to find a Contra Costa short sale specialist.  Making this decision is a big deal, and it is important to surround yourselves with professionals who will help you make the best decision possible!

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You may expect an eviction if your home is sold as a result of a foreclosure sale. There’s no difference if the sale is by auction, or by a trustee’s sale. The eviction new york court process is the legal process in New York by which a property owner physically removes a tenant. Every jurisdiction has its own type of evictions court.  

  Evictions

Often, evictions are guided by restrictive legal standards, and the tenant often has more rights than the new property owner. In many states, tenants may sue their landlord for breach of contract, possibly violation of local town laws and obtain a judgment for many times their monthly rent if they win. Some cities create it extremely hard to evict renters for any reason. This is not the situation with foreclosure evictions because the former homeowners are not legally considered tenants. Well-meaning people as a rule tell foreclosure victims about experiences they learn about where landlord law was invoked in a foreclosure action. This is not the usual situation where foreclosures are involved.  

  Foreclosure evictions are handled slightly differently in most cities so it is vital that you contact the court issuing the eviction notice to define what to expect. The person who handles the eviction notice, or posts it on the front door usually is not the same person who will compel the ny tenant landlord eviction. The eviction will be prosecuted by a representative of the bank, and will often conclude with a county sheriff enforcing the eviction. From time to time, the person delivering the final notice will tell you that you “actually” have an extra 72 hours before the sherriff come to evict you, but do not use this extra time. Plan on being fully moved out  before they return.  

  If you can’t find a new apartment, contact your local Red Cross or county housing agency for an area to remain temporarily and for cash if necessary. If you have the means to rent a storage unit for your furniture, store it until you find a place to move to so you aren’t driving a rental truck around town searching for a place to rent. A little preparation is helpful in avoiding tons of aggravation later.    

The actual eviction may be operated differently, but often, within days after service of the final notice, an officer of the court (sheriff or policeman) accompanies the new owner, or his representative, to the property and alerts anyone on the premises that the eviction will begin in a few minutes. In this situation, the owner’s representative is responsible for having someone remove everything they don’t own from the premises. The people on the premises are being evicted, in addition to their belongings of the property. If the contents are junk, or if the owner doesn’t wish any of it, it often will be thrown on the front lawn or the street for sanitation to pick up. If the former owners are not on the premises, the contents could still be thrown out or held by the new owner. Take action to settle your foreclosure early, or leave before the actual eviction happens.

The number one oversight most men and women make when buying  Newport Beach foreclosures is getting in over their heads monetarily, says Leo Nordine, owner of Nordine Realtors in Hermosa Beach.

“If you simply cannot afford to get a 30-year fixed, you cannot afford the home. I can’t tell you how many houses I have sold much more than once mainly because the buyer didn’t do their homework and ended up losing the home to foreclosure two years down the road,” said Nordine, who has specialized in foreclosure property since 1990.

Thinking about buying  Newport Beach foreclosures? Here are five ideas from Nordine:

Recognize the marketplace. Subscribe to ForeclosureRadar. The map-based system makes it possible for subscribers to track foreclosures all through California and the West Coast with 60 criteria (lender, value and map, for example). The site has a foreclosure learning center and provides a three-day trial (free of charge) or perhaps a monthly subscription ($49.95). “You can target properties and look up the sale date and other information,” Nordine states. “You can know about the property details prior to the listing agent.”

Acquire smart. “The cheap stuff is bottoming out. The high end is still going down. So Newport Beachis a good place to acquire perfect now simply because it’s at the bottom. Brentwood, in my opinion, is even now likely to drop,” he adds. Nordine states South L.A., Riverside, North Long Beach and East L.A. are excellent bets for foreclosure bargains. “Those are places which are relatively safe for investments, because you aren’t likely to obtain and watch the price drop 10% six months later,” he claims.

Be prepared to beat the pack. Good  Newport Beach foreclosures garner multiple offers, so write a clean “as-is” offer that permits for the seller’s “choice of title” and “choice of escrow.” Sellers are drawn to offers that need much less work for them, Nordine claims. So be ready to jump through all the hoops. “If the property is owned by Chase, and Chase requires pre-qualification by a Chase loan rep, for example, get the pre-qualification right away. If they want proof of funds or perhaps a credit report, have that documentation ready to go,” he says.

Leave attachments at the door. “It can be a tough marketplace with plenty of people seeking deals, so it’s easy to get discouraged, Nordine says. “But if you’re hardworking and keep trying, you will eventually locate a good foreclosure.”

Get the huge picture. With fewer disclosure requirements on most foreclosures, Nordine states it is critical to do your due diligence on the history of the home and get information about the property, past and present. Continue to keep an eye out for outstanding liens, loans, fees and tax debts that could reassign and become your own personal post-sale aggravation.

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