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 S.Ogden, UT

Latitude: 41.227744 -- Longitude: -111.961193

Other Area Cities: Ogden Clearfield Clinton Eden Layton North Ogden South Ogden Riverdale Roy Washington Terrace

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Originally named Fort Buenaventura, the city of Ogden was the first permanent settlement by people of European descent in the region that is now Utah. It was established by the trapper Miles Goodyear in 1846 about a mile west of where downtown Ogden is currently located. In November 1847, Fort Buenaventura was purchased by the Mormon settlers for $1,950. The settlement was then called Brownsville, but was later named Ogden for a brigade leader of the Hudson Bay Company, Peter Skene Ogden who trapped in the Weber Valley. The site of the original Fort Buenaventura is now a Utah state park. Ogden is the closest sizable city to the Golden Spike location at Promontory Summit, Utah, where the First Transcontinental Railroad was joined in 1869. Ogden was known as a major passenger railroad junction owing to its location along major east-west and north-south routes. Railroad passengers traveling west to San Francisco from the eastern United States typically passed through Ogden. -- Source: Wikipedia.com

Utah 2000 Census Population Profile Map

	Ogden	Utah	United States
Population	77,226	2,233,169	281,421,906
Median age	28.6	27.1	35.3
Median age for Male	28.1	26.7	34
Median age for Female	29.2	27.7	36.5
Households	27,384	701,281	105,480,101
Household population	74,870	2,192,689	273,643,273
Average household size	2.73	3.13	2.59
Families	18,405	535,294	71,787,347
Average family size	3.32	3.57	3.14
Housing units	29,763	768,594	115,904,641
Occupied units	27,384	701,281	105,480,101
Vacant units	2,379	67,313	10,424,540

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