My guest blogger today is Robert Eisenstein of Home Run Homes, an on-line portal that lists thousands of homes to lease with an option to buy nationwide. He actually has some really cool listing in Canada, in cities in Canada like Ontario and Ancient Barrie as well.  After going live in 2002 and keeping up with technology, this portal is in the top three sites for this unique real estate idea. With the market the way it is, and perhaps the way it is going, renting with the option to buy a home is becoming a popular technique for people not yet ready to buy today-but able to buy tomorrow. This trend will continue to grow while the American economy continues to repair itself and people continue to need housing. So, today I proudly let Rob step in and do my blog post!

 

As the real estate market has shown some signs of improving, there is still a long way to go. During these past few difficult years, buyers and sellers have been using the “Rent to Own” process (also called a lease option, lease purchase, or lease to own), in order to either buy or sell a home during a contracted period of time.

 

 

 

In a nutshell, the Rent to Own process is defined as when a buyer and a seller agree to a lease on a property, with an option to purchase the property within a given period of time. Within the terms of the agreement/contract, the rent amount, term, and the purchase price are all negotiated. One other main factor included in the agreement is the “Rent Credit”, or the amount of the rent that can be used for the down payment (the percent of the rent that will be applied towards the ultimate purchase price or towards the “down payment”). This amount varies, and can range from no rent credit to 25-50%, i.e., on a $2,000 rent payment, $1,000 of the rent would be applied towards the down payment (for the 50% rent credit).

 

 

 

 

 

The Rent to Own process has become a highly viable alternative in the current market. Since bank financing has tightened up, sellers are in a position where they need to be open to creative ideas, and buyers have taken a massive hit on their credit scores, and the option of using Rent to Own has opened up the prospects of home-ownership for them.

 

 

 

Now, this arrangement is significantly different than a standard Rental agreement in that when a tenant just rents a home, it is open-ended, in other words, there is no agreement to purchase the property, and along with this, there is no “Rent Credit” applied towards the purchase price. It is often likened to lighting up and burning your money since there is no agreement, or option, to purchase the home. One major benefit is locking in the purchase price (arguably, favoring the buyer OR the seller, depending on the market conditions forecasted over the contract term).

 

 

 

When discussing Rent to Own, it is always important to look at 3 players in the equation: banks, attorneys, and realtors. If you are using bank financing, upon the point of purchase, your bank will need an appraisal. Rent to Own contracts have become more common over the past few years, and most banks have become aware of how they work and why they are structured as such. In terms of negotiating the agreement, it is always the best advice to use an attorney in order to adhere to the rules (state & local laws), and to provide the language/terms needed in the agreement to make it legally binding. If you don’t want to go at it alone and would like to seek the assistance of a realtor, the realtor “usually” (a very broad “usually”) gets compensated with one month of the rent (as in a normal rental), and even a % of the sale, of course, all to be negotiated with the realtor. Most realtors will pursue this type of sale in order to get more business (it is usually called a lease option in the physical MLS listing for the property.

 

 

 

Home Run Homes is a centralized marketplace which helps people find a rent to own property, sell a rent to own property, and offer services nationwide and globally to the thriving rent to own market. We have been proud to be a part of the Rent to Own market since 2002, and we look forward to continuing to be the place for buyers and sellers to find each other in order to accomplish their goals. You can contact them for more information by email homebuyer (at) lease2buy.com To learn more, follow them on twitter ! 

 

 

 

Thanks, Rob- that was great. I hope these shows people that there is an alternative to buying a home before you are ready. Sometimes you just need to take the right steps.