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 Logan, UT

Latitude: 41.737878 -- Longitude: -111.830846

Other Area Cities: Logan Brigham City

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Logan is a city in Cache County, Utah, in the United States. As of the 2000 census, the city population was 42,670, a substantial increase over the 1990 figure of 32,771. The estimated population in 2005 had increased to 47,357. The Logan metropolitan area contains 109,666 residents. It is the county seat of Cache CountyGR6. It is the principal city of and included in the Logan, Utah-Idaho (partial) Metropolitan Statistical Area. Logan is located in northern Utah, north of Ogden on the Logan River; it is about 82 miles (130km) north of Salt Lake City. The city was founded in 1859 by Mormon settlers and has been the location of the Logan Utah Temple since its dedication in 1884. It is home to the main campus of Utah State University, founded in 1888, and is often known as a college town. It is also a major producer of cheese and other dairy products. -- Source: Wikipedia.com

Utah 2000 Census Population Profile Map

	Logan	Utah	United States
Population	42,670	2,233,169	281,421,906
Median age	23.5	27.1	35.3
Median age for Male	24.2	26.7	34
Median age for Female	22.7	27.7	36.5
Households	13,902	701,281	105,480,101
Household population	40,532	2,192,689	273,643,273
Average household size	2.92	3.13	2.59
Families	9,174	535,294	71,787,347
Average family size	3.2	3.57	3.14
Housing units	14,692	768,594	115,904,641
Occupied units	13,902	701,281	105,480,101
Vacant units	790	67,313	10,424,540

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