Rent to Own / Owner financing

November 20, 2008

Just recently I talked to a home repairman. He was telling me how he’d worked for a builder for over 10 years and how he had an “agreement” to purchase a home from his boss. They’d agreed on a price ($23,000) and on an amount that would come out of his paycheck every month. But that was it. Nothing in writing, no mention of interest. The home was in bad repair and the employee spent long hours and money renovating the home. The builder refused to do any repairs as he told the employee that as a home “owner”, it was the employee’s responsibility. Fast forward 10 years. The employee had come into some money and wanted to pay off the home and get a deed. He had enough money to pay off the principle and enough left over to pay interest of 8%. The builder refused the payoff, stating that as the home was worth more now, he wanted an additional $20,000 but that if the employee wanted, he could continue paying monthly. Needless to say, that employee is no longer working for the builder and no longer living in the house he’d called home for over 10 years.

Many people with poor credit feel that a “rent to own” option will help them find a home. They think that it is similar to going to some of the “no credit check” rent-to-own furniture stores that are in every town. “I’ll pay $1000 a month and then one day I’ll own the home”. Yes, it is possible to structure a “rent to own” contract, but it is extremely important to lay out all contingencies. How much of the base rent will go towards principle? Who is responsible for repairs? Is there a default clause if the buyer leaves the home before the house is paid off? Will the buyer forfeit the equity or will he get some of it back? In the case of delinquent rent, will the equity be applied to delinquent rent and the purchase/rent to own contract be voided? Remember, in a rent to own situation, the tenant/purchaser does not have title to the property.

Owner financing is different. In this case, deed is passed to the buyer at closing and a mortgage is held by the seller. The buyer will sign a mortgage note and mortgage the home. The terms of the note will have been negotiated before closing. In this case, the seller is not responsible for any repairs to the home and must proceed through legal channels to foreclose on the property should the buyer default on the mortgage note. Most sellers are reluctant to owner finance to someone with poor credit, but if there extenuating circumstances, this might be an option for those buyers who are not eligible for traditional financing.

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Local Information for Rancho Santa Fe, CA

Latitude: 33.023943 -- Longitude: -117.20011

Other Area Cities: Encinitas Del Mar Solana Beach San Marcos Rancho Santa Fe Escondido

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Rancho Santa Fe is an unincorporated census-designated place in San Diego County, California, United States. The population was 3,252 at the 2000 census. It is the second highest income community in the United States with at least 1,000 households. Rancho Santa Fe has strict design restrictions. Many streets outside of the downtown area are lined with landscaping; on side streets the landscaping of individual properties provides ambient decor. Very few homes are visible from the road. The downtown is centered around the intersection of Linea del Cielo/Paseo Delicias and La Granada/Via de Santa Fe. It is the site of offices of financial firms, restaurants, and small stores. A library and a school are also located here. Outside of this area, Rancho Santa Fe is exclusively residential except for a number of golf courses and country clubs. Rancho Santa Fe's ZIP code (92067) was ranked second on Forbes list of most expensive zip codes for 2006, after Sagaponack, New York. -- Source: Wikipedia.com

California 2000 Census Population Profile Map

	Rancho Santa Fe	California	United States
Population	3,252	33,871,648	281,421,906
Median age	46.9	33.3	35.3
Median age for Male	47.3	32.2	34
Median age for Female	46.6	34.4	36.5
Households	1,204	11,502,870	105,480,101
Household population	3,252	33,051,894	273,643,273
Average household size	2.7	2.87	2.59
Families	948	7,920,049	71,787,347
Average family size	3.01	3.43	3.14
Housing units	1,339	12,214,549	115,904,641
Occupied units	1,204	11,502,870	105,480,101
Vacant units	135	711,679	10,424,540

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