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 East Lansing, MI

Latitude: 42.740384 -- Longitude: -84.481675

Other Area Cities: East Lansing Forest Hills Holt Lansing Okemos Haslett Mason

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The settlement of East Lansing began around 1847, the same year nearby Lansing was made the capital of the state of Michigan. Downtown East Lansing was an important junction of two major Native American trails: the Okemah Road, and the Park Lake Trail. By 1850, the Lansing and Howell Plank Road Company was established to connect a toll road to the Detroit and Howell Plank Road, improving travel between Detroit and Lansing, which cut right through what is now East Lansing. The toll road was finished in 1853, and included seven tollhouses between Lansing and Howell. Michigan Agricultural College (now Michigan State University) was founded in 1855 and established in what is now East Lansing in 1857. For the first four decades, the students and faculty lived almost entirely on the College campus. A few commuted from Lansing, and that number increased when the streetcar line was built in the 1890s, but there were few places to live in the then-rural area immediately around the campus. -- Source: Wikipedia.com

Michigan 2000 Census Population Profile Map

	East Lansing	Michigan	United States
Population	46,525	9,938,444	281,421,906
Median age	21.7	35.5	35.3
Median age for Male	21.9	34.3	34
Median age for Female	21.5	36.6	36.5
Households	14,390	3,785,661	105,480,101
Household population	31,952	9,688,555	273,643,273
Average household size	2.22	2.56	2.59
Families	5,090	2,575,699	71,787,347
Average family size	2.82	3.1	3.14
Housing units	15,321	4,234,279	115,904,641
Occupied units	14,390	3,785,661	105,480,101
Vacant units	931	448,618	10,424,540

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