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.

As of 11/22/09 the Liz Unger RePage is ranked at 5,785 with 45 points.
The monthly top RePage owner will receive a cash prize. Help this agent by bookmarking this site and posting it to blogs and other Web pages and encourage others to visit.

One of Adams Countys Best Sellers

Honest, upfront answers to your real estate questions Loyalty, confidentiality, and trust ALWAYS! Over 9 years experience in real estate. Native of Adams County with knowledge of the Adams County and surrounding real estate market. ABR, Accredited Buyer Representative GRI, Graduate, Real Estate Institute Experience, know-how and trust -- Liz Unger handles all your real estate needs. From finding the home, mortgage, insurance and closing agent, Liz will handle it all! Service counts, so call someone who cares! Call Liz Unger today!

Posted by Liz Unger on December 13, 2008 at 12:00 AM

As of 11/22/09 the Liz Unger RePage is ranked at 1,377 with 480 points.
The monthly top RePage owner will receive a cash prize. Help this agent by bookmarking this site and posting it to blogs and other Web pages and encourage others to visit.

Local Information for Gettysburg, PA

Latitude: 39.82929 -- Longitude: -77.234218

Enter our Photo Sweepstakes and Win $200 for your Gettysburg photos!

Click on Photos to Enlarge. To see all Gettysburg area photos Click Here.

Submit your photos of Gettysburg and become eligible to win $200. Click Here for details.

Pennsylvania 2000 Census Population Profile Map

	Gettysburg	Pennsylvania	United States
Population	7,490	12,281,054	281,421,906
Median age	23.1	38	35.3
Median age for Male	22.8	36.5	34
Median age for Female	24.3	39.4	36.5
Households	2,541	4,777,003	105,480,101
Household population	5,513	11,847,753	273,643,273
Average household size	2.17	2.48	2.59
Families	1,231	3,208,388	71,787,347
Average family size	2.94	3.04	3.14
Housing units	2,759	5,249,750	115,904,641
Occupied units	2,541	4,777,003	105,480,101
Vacant units	218	472,747	10,424,540

Visit US Census