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 Clarksville, TN

Latitude: 36.559383 -- Longitude: -87.358261

Other Area Cities: Pleasant View Dover Clarksville Hopkinsville

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Clarksville is a city in Montgomery County, Tennessee, USA. As of the 2005 census estimates, the city had a total population of 123,395. Today, Clarksville, is the county seat of Montgomery County and is Tennessee's fifth largest city, and the fastest growing city in Tennessee. Clarksville is the home of Austin Peay State University, and is approximately 10 miles from Fort Campbell, Kentucky Army post. The U.S. Census says that Clarksville is the fastest-growing large city in Tennessee and the 17th in the nation. It was the only city in Tennessee to make the top 25. Pat Summittwas born in Clarksville, Tennessee and she is the winningest Division I college basketball coach of all time. Clarksville is part of the Clarksville-Hopkinsville metropolitan statistical area (MSA). Clarksville has the distinction of being home to the oldest bank in the state, the Northern Bank established in 1854, now AmSouth Bank; the state's oldest newspaper, The Leaf-Chronicle. -- Source: Wikipedia.com

Tennessee 2000 Census Population Profile Map

	Clarksville	Tennessee	United States
Population	103,455	5,689,283	281,421,906
Median age	28.8	35.9	35.3
Median age for Male	27.8	34.5	34
Median age for Female	29.8	37.2	36.5
Households	36,969	2,232,905	105,480,101
Household population	99,375	5,541,337	273,643,273
Average household size	2.69	2.48	2.59
Families	26,965	1,547,835	71,787,347
Average family size	3.12	2.99	3.14
Housing units	40,041	2,439,443	115,904,641
Occupied units	36,969	2,232,905	105,480,101
Vacant units	3,072	206,538	10,424,540

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