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 Des Moines, IA

Latitude: 41.590939 -- Longitude: -93.620866

Other Area Cities: Ankeny Urbandale West Des Moines Des Moines Indianola

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Des Moines (French for 'City of monks') is the capital and largest city of the U.S. state of Iowa. It was incorporated on September 22, 1851, as Fort Des Moines, until it was shortened to "Des Moines" in 1857.[1] It is also the county seat of Polk County. Des Moines is the headquarters for the Principal Financial Group, the Meredith Corporation, and Ruan Transportation. The city of Des Moines bills itself as the third-largest insurance center in the world, behind London, United Kingdom, and Hartford, Connecticut. [2] Other major corporations such as Wells Fargo, ING Group, and John Deere have large operations in or near the metro area. Forbes Magazine ranked Des Moines as the 11th "Best Place for Business" in 2006. Des Moines was founded in May 1843 when Captain James Allen built a fort on the site where the Des Moines and Raccoon Rivers merge. Allen wanted to use the name Fort Raccoon, but the American War Department told him to name it Fort Des Moines. -- Source: Wikipedia.com

Iowa 2000 Census Population Profile Map

	Des Moines	Iowa	United States
Population	198,682	2,926,324	281,421,906
Median age	33.8	36.6	35.3
Median age for Male	32.6	35.2	34
Median age for Female	35.1	38	36.5
Households	80,504	1,149,276	105,480,101
Household population	192,145	2,822,155	273,643,273
Average household size	2.39	2.46	2.59
Families	48,710	769,684	71,787,347
Average family size	3.04	3	3.14
Housing units	85,067	1,232,511	115,904,641
Occupied units	80,504	1,149,276	105,480,101
Vacant units	4,563	83,235	10,424,540

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