If you are having a hard time selling or purchasing a home, seller financing is one way for sellers to magnetize buyers and for buyers with bad or no credit to own a home.
One of the most admired owner financing deals is rent with option to buy homes, also known as the “rent-to-own”
What is a Lease Option?
Simply put, the lease opportunity is a type of real estate transaction wherein the buyer leases the home for a stated amount of time before choosing whether or not to use a pre-determined option to buy it at the end of the lease.
There are two contracts concerned in the lease option: a lease and an option contract. The lease is usually a standard lease, exactness how long you will lease the home and your rent each month. The option kicks in at the lease’s conclusion. For example, if the lease period is two years, you have the option to buy the property within that time period.
Compensation on Rent with Option to Buy Homes
Renting a home before purchasing it has the clear benefit of giving you a “trial run.” You will know by the time your lease is up whether or not it’s the home for you.
Other compensation for buyers includes:
Compulsory saving for your down payment: Even those with the best of intentions may find it hard to save for a down payment on a house. In the lease-option condition, the additional amount you pay in rent every month is set aside by the property-owner/
Time to secure your credit: Whether you opt for a one-year or a three-year lease, this time can be spent fixing or building your credit. That way, when the lease is up and it is time to pursue a mortgage loan, you’ll be all set to be eligible.
No huge down payment necessary: Unlike the 20 percent or more down payments necessary in a conventional home buy, a typical lease option transaction calls for first and last month’s rent and an extra option deposit. The amount of that deposit is flexible. Some of the great deals on rent to own homes are available at www.msrent2own.com
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Here is some lease option terms you should familiarize yourself with:
Term: The lease’s term is the duration of the lease. Term is always flexible. If you think you’ll need two years to save for a down payment or to secure your credit, then you will want to negotiate at least a two-year lease term.
Payment: This is the amount of rent you will pay each month. Again, this is flexible but the rent will usually be above the average for the market.
Rent Credit: This term describes the amount of rent that the property-owner/
Lease Option Fee: The lease option fee is the cost of the option to buy the home. The fee is flexible and is usually, but not always, 1 percent of the buy price. The option agreement should specify whether or not the option fee is refundable (normally option fees are not refundable) and whether it will be applied to the purchase price should you implement the option.
Option contracts differ in the terms used, depending on who is sketching them up. Keep in mind that there are certain basics all real estate contracts should include:
• Purchase price: This is the amount that both parties have agreed to, focus to an evaluation when the option is exercised.
• Closing date: All contracts must include a date of termination.
The real estate contract must be signed by all parties to be legally enforceable.
Of course, this is a vital look at the lease-option transaction. There are many variations and the method may be full of pitfalls. Apparently, however, it seems like an easy technique, which lulls many buyers into the DIY manner.
It is important to recognize both the lease and the option contract, in full, before signing either document. Your best security is to spend an hour or two with an attorney to make sure you are fully alert of the details.