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 Cromwell, CT

Latitude: 41.674266 -- Longitude: -72.784303

Other Area Cities: Berlin Farmington Glastonbury Rocky Hill New Britain Bloomfield Bristol

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New Britain was settled in 1687 and was incorporated as a parish under the name New Britain Society in 1754. Chartered in 1850 as a township and in 1871 as a city, New Britain was separated from the nearby town of Berlin, Connecticut. A consolidation charter was adopted in 1905. During the early part of the 20th century, New Britain was known as the "Hardware Capital of the World," as well as "Hardware City." Major manufacturers, such as The Stanley Works and Corbin Locks, were headquartered in the city. In 1843 Frederick Trent Stanley established Stanley's Bolt Manufactory in New Britain to make door bolts and other wrought-iron hardware. In 1857 his cousin Henry Stanley and founded The Stanley Rule and Level Company in the city. Planes invented by Leonard Bailey and manufctured by the Stanley Rule and Level Company, known as "Stanley/Bailey" planes, were prized by woodworkers of the late 19th and early 20th centuries and remain popular among wood craftsmen today. -- Source: Wikipedia.com

Connecticut 2000 Census Population Profile Map

	New Britain	Connecticut	United States
Population	71,538	3,405,565	281,421,906
Median age	33.9	37.4	35.3
Median age for Male	32.5	36.1	34
Median age for Female	35.2	38.6	36.5
Households	28,558	1,301,670	105,480,101
Household population	68,467	3,297,626	273,643,273
Average household size	2.4	2.53	2.59
Families	16,942	881,170	71,787,347
Average family size	3.08	3.08	3.14
Housing units	31,164	1,385,975	115,904,641
Occupied units	28,558	1,301,670	105,480,101
Vacant units	2,606	84,305	10,424,540

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