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 Hoover, AL

Latitude: 33.386435 -- Longitude: -86.804938

Other Area Cities: Homewood Birmingham Bluff Park Fairfield Mountain Brook Vestavia Hills Hoover Tarrant City McCalla

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Hoover is a city in Jefferson and Shelby counties in middle central Alabama, in the United States. A suburb of Birmingham, the population of the city was 62,742 as of the 2000 (census) and was estimated to be 67,469 in 2005. Hoover is now one of the three primary cities in the Birmingham-Hoover-Cullman Combined Statistical Area, consisting of the Birmingham-Hoover metropolitan statistical area and the Cullman micropolitan area. Hoover’s neighborhoods and planned communities are located along the once rolling foothills of the Appalachian Mountains. Hoover is home to the Riverchase Galleria, which is one of the largest shopping centers in the Southeast and Alabama's most visited tourist destination. Also, it is one of the largest mixed-used centers in the country (around 2 million in square footage). The anchors of this shopping center are JCPenney, Parisian, Belk, Macy's, and Sears. [1] -- Source: Wikipedia.com

Alabama 2000 Census Population Profile Map

	Hoover	Alabama	United States
Population	62,742	4,447,100	281,421,906
Median age	36.2	35.8	35.3
Median age for Male	34.9	34.4	34
Median age for Female	37.4	37.2	36.5
Households	25,191	1,737,080	105,480,101
Household population	62,251	4,332,380	273,643,273
Average household size	2.47	2.49	2.59
Families	17,407	1,215,968	71,787,347
Average family size	3	3.01	3.14
Housing units	27,150	1,963,711	115,904,641
Occupied units	25,191	1,737,080	105,480,101
Vacant units	1,959	226,631	10,424,540

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