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 Overland Park, KS

Latitude: 38.940071 -- Longitude: -94.680697

Other Area Cities: Kansas City Leawood Lenexa Mission Olathe Prairie Village Mission Hills Monticello Shawnee Mission Bonner Springs Overland Park Grandview Kansas City Overland Park Liberty Belton

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The city was incorporated as a first-class city on May 20, 1960, making it one of the youngest communities in Johnson County. Its initial population was 28,085 and was bounded by Antioch Road (West), 107th Street (South), Chadwick (East) and I-35 (North). In 1960 the population was 28,085 with 17.2 square miles incorporated. By 1990 the population was 111,790 and in 1995 the incorporated land area was 56.6 square miles. Since 1995, the population has since grown to over 167,000 by 2005 with 62.26 square miles of land area. Overland Park is now the second most populous city in Kansas. The city traces its roots back to 1905, with the arrival of its founder, William B. Strang Jr., who platted subdivisions along a military roadway on 600 acres (2.4 km²) he purchased that are now part of the old downtown area. -- Source: Wikipedia.com

Kansas 2000 Census Population Profile Map

	Overland Park	Kansas	United States
Population	149,080	2,688,418	281,421,906
Median age	36.3	35.2	35.3
Median age for Male	34.9	33.7	34
Median age for Female	37.5	36.5	36.5
Households	59,703	1,037,891	105,480,101
Household population	147,492	2,606,468	273,643,273
Average household size	2.47	2.51	2.59
Families	39,718	701,547	71,787,347
Average family size	3.06	3.07	3.14
Housing units	62,586	1,131,200	115,904,641
Occupied units	59,703	1,037,891	105,480,101
Vacant units	2,883	93,309	10,424,540

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