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 Plymouth, MI

Latitude: 42.372636 -- Longitude: -83.46852

Other Area Cities: Plymouth Canton Northville Novi Redford Livonia Farmington Hills West Bloomfield Ann Arbor Beverly Hills Dearborn Dearborn Heights Farmington Garden City Inkster Oak Park South Lyon Southfield Walled Lake Westland Whitmore Lake Wixom Ypsilanti

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The first settlers to come to what is now known as Plymouth, Michigan, were Keziah (Benjamin) and William Starkweather. Farmers from Ct., they purchased 240 acres of land from the United States Government on March 11, 1825, for $1.25 an acre. Mr. and Ms Starkweather came from Preston, CT., where the Starkweather family had lived at least as early as 1694, according to a land gift record in which Captain John Masons gave land to Robert Starkweather, Williams GG Grandfather. William, ninth born of 11 siblings, and his wife Keziah brought their first born son Albert to the area, and built the first home in Plymouth, at the South West Corner of Main Street and Ann Arbor Trail. The first home was a rustic lean to, and was later replaced by a log cabin which has since been lost to time. William's eldest Son Albert died at age 20 while attending the newly formed University of Michigan as a Sophomore. -- Source: Wikipedia.com

Michigan 2000 Census Population Profile Map

	Plymouth	Michigan	United States
Population	9,022	9,938,444	281,421,906
Median age	37.9	35.5	35.3
Median age for Male	36	34.3	34
Median age for Female	39.9	36.6	36.5
Households	4,322	3,785,661	105,480,101
Household population	8,820	9,688,555	273,643,273
Average household size	2.04	2.56	2.59
Families	2,276	2,575,699	71,787,347
Average family size	2.81	3.1	3.14
Housing units	4,498	4,234,279	115,904,641
Occupied units	4,322	3,785,661	105,480,101
Vacant units	176	448,618	10,424,540

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