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 Seminole, FL

Latitude: 27.838502 -- Longitude: -82.784913

Other Area Cities: Seminole Clearwater Dunedin Largo Pinellas Park Saint Petersburg Treasure Island

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There were 5,989 households out of which 12.6% had children under the age of 18 living with them, 35.4% were married couples living together, 7.4% had a female householder with no husband present, and 54.9% were non-families. 49.1% of all households were made up of individuals and 33.8% had someone living alone who was 65 years of age or older. The average household size was 1.75 and the average family size was 2.48. In the city the population was spread out with 11.8% under the age of 18, 3.8% from 18 to 24, 19.5% from 25 to 44, 21.3% from 45 to 64, and 43.6% who were 65 years of age or older. The median age was 59 years. For every 100 females there were 76.2 males. For every 100 females age 18 and over, there were 72.3 males. -- Source: Wikipedia.com

Florida 2000 Census Population Profile Map

	Seminole	Florida	United States
Population	10,890	15,982,378	281,421,906
Median age	59.1	38.7	35.3
Median age for Male	53	37.3	34
Median age for Female	64.1	40.1	36.5
Households	5,989	6,337,929	105,480,101
Household population	10,505	15,593,433	273,643,273
Average household size	1.75	2.46	2.59
Families	2,701	4,210,760	71,787,347
Average family size	2.48	2.98	3.14
Housing units	7,297	7,302,947	115,904,641
Occupied units	5,989	6,337,929	105,480,101
Vacant units	1,308	965,018	10,424,540

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