Dockrey Apartments
Nova Scotia
902 899 8394 ©


Dockrey Apartments




Rent To Own

Buying   Credit Repair   Risk-Benefit   Rent-comparison   Disaster   The Lease   Application  

Dockrey Apartments has offered several properties as Rent To Own, Properties from our selection, and, working with the tenant/purchasor, Properties the tenant/purchasor has found from real estate listings that we have purchased for the tenant/purchasor. Both types have proceeded well, and the resident tenants/purchasors are very happy in their homes. There are many preconceptions, misconceptions, and much misinformation available about Rent To Own property, some of which comes from otherwise reputable sources, some from Urban Myth.
The information on these pages will help dispel the misconceptions about Rent to own, and help you decide if Rent To Own a home is for you.

What Is A Rent To Own Home?
The term Rent To Own can also be; Lease/Purchase, Lease With Option To Purchase, Rent To Buy, or many other terms. Rent To Own Homes have become a popular way for the owner of a home to sell it to a potential buyer, and for a buyer to secure an otherwise unreachable home. Although it is much like owner financing there are some common differences.

Buying a Rent To Own Home typically begins with a lease period and includes an option to purchase the home at the end of the lease.
Although there is no standard for a Rent To Own Home Agreement, many contracts contain common provisions. In general the agreement allows a tenant to become a homeowner if certain conditions are met. Those conditions usually require the tenant/buyer to pay an initial Option Fee and a Monthly Lease Payment for a specified period of time.
At the expiration of the lease period the tenant has the option to purchase the home for a specified amount. Financing the purchase at this time requires the tenant to secure a loan through a bank, mortgage lender or other outside source.

Rent to own (real estate)
©Wikipedia, the free encyclopedia (Rent to own homes)
Rent to own is a real estate term relating to a real estate agreement which is comprised of a rental lease and a purchase agreement where the tenant has the option to purchase the property at a fixed price at a specified point of time in the future. It is also known as lease to purchase option, lease option, owner financing or lease-to-own.
The lease resembles that of a typical rental lease where the property owner, the lessor, allows the other party, the lessee, to occupy the property in return for a monthly payment. The option to purchase the property usually states the price at which the property is to be bought and the date at which the tenant is able to exercise the option.
Rent to own contracts typically become more popular during housing market downturns as landlords use them as a way to find good tenants. The seller entices the tenant by having a specified portion of the rent as a credit towards a down payment on the house, giving the tenant time to rebuild their credit if necessary.Canadian Information, rent to own.

The Option To Purchase
The Option To Purchase can be contained within the Rent To Own, Lease Purchase Agreement, or exist as a separate contract. This provision normally stipulates the tenant/buyer's right to purchase the home for a specified amount at given time, usually the end of the lease period. The fee attached to this the Option Payment.

The Option Payment
The Option Payment is partly paid at the beginning of the lease period but should not be confused with a Rental Security Deposit. The Option Payment is a fee paid for the right to purchase the home. It is not refundable. It is applied as a credit towards the purchase price of the home.

Rent To Own Home Example

Price $140,000
Option Deposit $1,400
Option Payment $235
x24 $5,640
Total $7,040
Finance amount $132,960
Valuation $150,000
Equity $17,040

This example illustrates a home, rent to own for $140,000.
A 1% Deposit equals $1400. This amount is paid at the time that the lease begins.
In this example the Option Payment is calculated to add to a 5% deposit over two years, ($140,000 x 4%)/24 = $235 per month to be credited towards a down payment on the home when the buyer purchases it.
The monthly Rent Payment on the home in this example is equal to the mortgage payment at 5% interest rate amortized for 20 years. This is a monthly payment of $920. The total monthly commitment is $1155
At the end of the 24 month lease period the tenant/buyer would have the option to purchase the home for $140,000.
Both the tenant/buyer & Landlord/Seller have expected that market movement & improvements by the buyer/tenant to their home have improved the value of the property to much above $140,000. in this example to $150,000.
During the lease period the tenant/buyer has built a total Down Payment Credit of $7,040. and equity in the property of $10,000. At this time the tenant/buyer would need to secure financing for $132,960 to purchase the Rent To Own Home.
95% of the asking price, 88.6% of the lender's valuation of the property
The tenant/buyer has proof of their ability to pay the mortgage, and the additional amounts for unforseen repairs taxes insurances so gaining a mortgage loan is simplified

Buying A Rent To Own Home

Know Your Seller
Choosing a Rent To Own Home involves researching your seller's reasons for offering their home on a Rent To Own or Lease purchase basis. As a tenant/buyer you may be reluctant to ask for information about your seller. Don't make this mistake!
You have as much reason to check out your potential landlord/seller as they do you. Asking your seller a series of questions at the outset can save you a lot of grief later on.When looking for a Rent To Own home you will probably be dealing with one of the following three categories of sellers:
Individuals
Real Estate Investors
Builders/Developers

Individuals
Individuals often offer their homes for sale on a Rent To Own basis after they have attempted unsuccessfully to sell it on a standard basis. Today's market has made Rent To Own homes much more popular. People sometimes find themselves in a situation that they need to sell within a certain time frame or have some cash flow relief. There are a number of valid circumstances in which this can occur including:
Move Due To Job Change
Health Conditions, Death, or Disability
Under Contract To Purchase Another Home
Inability to Afford Rising Payments
Don't be afraid to ask your seller why they are offering the home for sale on a Rent To Own basis. When dealing with individuals you should be on guard for the individual that is asking more than market price for their home. With declining values in some areas and the recent popularity of 100% loans many people have found that they are so upside down in their homes that they cannot sell them and break even. Knowing the underlying financing and liability of the home you are purchasing on a Rent To Own basis can give you a good indication if the home will qualify as a feasible option for you as a buyer.

Real Estate Investors
You may want to begin by asking this question when dealing with a real estate investor:

Have you sold this home on a Rent To Own basis before?
If the answer is yes this may indicate that they sell homes to unqualified candidates on a regular basis and depend on the seller to default in order to gain their Option Fee.
A positive response does not always mean that this is the case. If they indicate that they have sold the home on a Rent To Own basis that did not work out then you may want to ask them what happened. There are many legitimate reasons for a Rent To Own sale not to go as planned. Make sure you are satisfied with theirs before you go any further.
If you are dealing with an investor that sells their homes regularly on a Rent To Own basis ask them for references. In addition be wary of the Real Estate Investor that asks for more than the standard 3-5% Option Fee. Remember that this fee is lost if your sale does not take place.

Builders
If you are dealing with a builder you should verify that your home is not part of a package construction loan that covers more than one property. You can also verify in writing with the builder's lender that your home will be separated from that package. Entire subdivisions have been sold on a Rent To Own basis and all of the tenant/buyers have been required to move due to builder foreclosure.
Make sure that any builder or developer that you deal with is solvent and the home that you are lease purchasing is not part of a package loan.
If you are purchasing a home from a builder make certain that it is completed. If it is not completed make sure that you have the terms of completion in writing.
Also remember that just because a home is new does not mean that it will appraise for it's asking price. Have a realtor give you a comparative market analysis (CMA) on the home or pay for an appraisal before you commit.

Regardless of which type of seller you are dealing with there are common pitfalls to avoid when purchasing a home on a Rent To Own basis.

You can have a realtor do area comparables for a rough idea of the market value of the home you are considering or you can pay for an appraisal before you commit yourself to purchase the home. A CMA (Comparative Market Analysis) from a realtor can be done in a minimal amount of time and usually at no cost. An appraisal can cost into the hundreds of dollars.
Being aware of your home value up front can save you thousands down the road. If the home you are considering is selling for market value you also need to consider the trend in the area. Are home prices increasing or declining? You should try to adjust your sales price at the option date to reflect the area market value. No matter how much you like the home, no bank is going to lend you over the appraised value on it.
Always Verify Your Seller's Financial Condition
They are going to ask about yours. Your seller should have acceptable credit and mortgage payment history or a good reason why they do not. In a standard sale situation your seller's financial condition does not matter. If the seller's title is clear, you use proper closing procedures, and you pay for the property, it is yours. With a Rent To Own or Lease/Purchase situation you may have a one to three year period in which your seller's financial condition may affect your transaction.
No matter what type of seller you are dealing with you should always check to make sure that the property has no liens, judgments, or encumbrances that would prevent a sale at the option time. A title company can do this for you. Make sure you are talking to the actual owner. It may sound silly but you should always verify that the person you are dealing with actually owns the home. There have been cases that involved renters and other non-owners offering to sell a Rent To Own home that they do not own.

Negotiating Your Terms
While you can offer the owner of any property the option to purchase it with a Rent To Own agreement, certain prospects are better than others. Individuals, investors, and builders are using lease purchase agreements more and more to sell homes that they otherwise could not move. Homes that are already for sale on this basis are much easier to Rent To Own than those that are not.

There are times when the owner of a home has not been able to sell the home and has already purchased another or is paying a payment on an empty property. These situations are often the best prospect for a Rent TO Own arrangement.
If you find a home in the area that you are looking in that has been for sale for over six months and is also vacant you may want to contact the owner to see if they have considered a Rent To Own or Lease Purchase agreement, If you are approaching the seller be candid about your situation whether it is a credit issue, coming up with a down-payment, or whatever your circumstances may be. Let them know that you are interested in purchasing the home but that you would have to have a short lease period before you could purchase the home outright.
Chances are that if the home is not already for sale on a rent to own basis that they have not considered this option. Give them a general idea of your terms and ask then to get back to you but let them know that you intend to purchase a home within the next week or two.

Make several contacts such as this and wait for their call.
Chances are within two weeks you will have several prospects for your new home. The more contacts that you make the better your chances are to find a home that you want on your terms.

Negotiating a Rent To Own home agreement can be a challenging process.
You should be familiar with the terminology, provisions and common pitfalls of lease purchase and option to purchase agreements. Although you can do this yourself it is always best to seek the advice of a real estate professional and/or attorney when dealing with your agreement.

Locating A Rent To Own Home
Locating a Rent To Own home can be accomplished using several different methods. The Internet, local realtors, and classifieds are probably the three most common methods.

The Internet
It has been estimated that over 80% of people that are in the market for a home browse the Internet for information before they physically go shopping for homes. Many realtors provide access to the local Multiple Listing Service (MLS) through their web site. Some provide only their listings others give you access to all of the listings available. Other Internet resources are search engines such as Google and Yahoo, online classifieds like craigslist.org, kijiji.com and backpage.com.

Local Realtors
Local realtors can also be a good resource. They can provide you with access to the local MLS listings, screen prospective sellers for their willingness to sell on a Rent To Own basis, gain access to homes for showing purposes, and help negotiate the sale for you. Finding a local realtor is easy. The difficult part is finding a local realtor that is knowledgeable about the Rent To Own and Lease Purchase process.

Classifieds
The classifieds section of your local newspaper and specialized real estate publications are another commonly used way to locate and preview homes for sale in your area. They can give you a general idea of pricing, pictures, and location. Rent To Own homes compromise a small percentage of the homes listed in these publications.

All of the above methods are a great place to start when looking for a Rent To Own home. At some point you will want to narrow your choices and negotiate a rent to own agreement with a seller.