In today's economy, many homeowners are wishing to sell their properties quickly but have found that the real estate market is "soft." Rather than waiting for months for the real estate market to "break," an option for a quick sale is to offer a "rent to own" property. In a "rent to own" transaction, the seller keeps the deed to the property and the tax advantage at filing time. The buyer has use of the home and is responsible for making the payments and an extra payment to go towards the purchase of the home. Rather than two separate payments many sellers lump these into one payment for the "rent" of the home.
To sell your home as a "rent to own," you must first determine the value of your property. This can be obtained by purchasing an appraisal from a certified real estate appraiser and by obtaining "comparables" of the sales of property in the last year that are equal in size and location. After obtaining a "fair market value," you will need to establish how much money you wish for the "rent" of the home, and how much you want to contribute to the "equity" or "down payment" for the home.
Take the amount that you wish for the rent ($500) and add to this the amount you wish to receive for your down payment at the end of the leasing term. If, for example, you want a 20% down payment on a $50,000 home ($10,000), then take the months of the lease (ex. 60 months €" five years) and divide the down payment ($10,000/60=$167.00); add this amount to the rental payment. You will ask $667.00 a month rent with the equity to go for the down payment in 5 years.
In five years you will have $10,000 to list for the buyer on the loan document to purchase their home for $50,000, minus the equity of $10,000, to secure a loan of $40,000. You will have the income of the rent for 5 years while the buyer will have the expected equity of $10,000 or more. At the end of the 5 years the buyer will be able to list an equity and down payment of $10,000 for their loan application. You will keep the $10,000 equity and you will also have the balance paid to you of $40,000. The home will be sold and occupied and it will sell quickly.
For the potential homeowner whose credit may have been ruined by a previous foreclosure, this is also a win-win deal. They will be allowed to rebuild their credit, purchase a home, gain equity in their home, and have a likely guaranteed home loan. Any credit that is in disrepair can usually be fixed in a five year period. With a 20% down payment, most lenders will approve even a slow pay client. For the period the buyer is occupying the home, the buyer can rebuild their credit and you can report the perfect payments.
To sell your home as a "rent to own," you must first determine the value of your property. This can be obtained by purchasing an appraisal from a certified real estate appraiser and by obtaining "comparables" of the sales of property in the last year that are equal in size and location. After obtaining a "fair market value," you will need to establish how much money you wish for the "rent" of the home, and how much you want to contribute to the "equity" or "down payment" for the home.
Take the amount that you wish for the rent ($500) and add to this the amount you wish to receive for your down payment at the end of the leasing term. If, for example, you want a 20% down payment on a $50,000 home ($10,000), then take the months of the lease (ex. 60 months €" five years) and divide the down payment ($10,000/60=$167.00); add this amount to the rental payment. You will ask $667.00 a month rent with the equity to go for the down payment in 5 years.
In five years you will have $10,000 to list for the buyer on the loan document to purchase their home for $50,000, minus the equity of $10,000, to secure a loan of $40,000. You will have the income of the rent for 5 years while the buyer will have the expected equity of $10,000 or more. At the end of the 5 years the buyer will be able to list an equity and down payment of $10,000 for their loan application. You will keep the $10,000 equity and you will also have the balance paid to you of $40,000. The home will be sold and occupied and it will sell quickly.
For the potential homeowner whose credit may have been ruined by a previous foreclosure, this is also a win-win deal. They will be allowed to rebuild their credit, purchase a home, gain equity in their home, and have a likely guaranteed home loan. Any credit that is in disrepair can usually be fixed in a five year period. With a 20% down payment, most lenders will approve even a slow pay client. For the period the buyer is occupying the home, the buyer can rebuild their credit and you can report the perfect payments.