Today I talk about some of the positives and negatives of a “lease purchase” (also usually known as “rent to own”) transaction in real estate. I get a fair number of these inquiries and most of them are from potential home buyers facing poor credit scores for a few years, generally from a recent foreclosure. I received a question from a listing client yesterday about whether it would be a good idea to discuss a lease purchase with some coworkers who seemed nice. The basic idea is that the buyer and seller write up a contract that allows the buyer to rent the property for a specified period of time, after which the renter/buyer would qualify for a mortgage and close on the home. During the rental period a portion of their rent payments may be allocated towards reducing the ultimate purchase price. Positives for a potential home buyer are that they get the home they want now, and have the critical time needed to improve their credit and gather down money. Positives for the seller are that they get their home “off the market” and can move on with their life. Negatives – there are unfortunately a lot. Just a couple I will mention: The buyer is trusting that the seller won’t go into foreclosure or keep their upfront down money for some reason. The seller is trusting that the buyer won’t trash the house (or any other rental nightmare scenario) during the rental period, then disappear before the purchase phase. There can be a LOT of assumptions made in a lease purchase (or “rent to own”) situation: the challenge is to get them all ironed out ahead of time! I would almost recommend that a seller hire an attorney for review of the proposed contract, just to make sure as many possibilities are covered in the document. If you are a potential Lancaster County Lease Purchase or “Rent to Own” customer, feel free to ask me a question at jeff@yourlancasterhome.com. I’ll see what I can do to help you in your specific financial situation. Thanks!
