The traditional method of selling your home directly to a buyer can be sidestepped slightly by renting it to them now with a rent-to-own contract for them to purchase it later. To get a better feeling for if this is the right move for you, let’s examine the pros and cons of using a rent-to-own agreement to sell a house in Redlands.
Pro: Set Your Terms
From the very beginning of offering a rent-to-own agreement, you’re the one who gets to determine the parameters for how everything operates.
During typical home sale negotiations, both parties work to meet in the middle and close on the property. In the case of a rent-to-own agreement, you can dictate a more solid starting point from which negotiations can start.
This gives you the opportunity to create the basis for a contract that you feel meets your needs while still being fair to the renter/buyer.
Con: Avoid the Pitfalls
Having the ability to get the ball rolling for your rent-to-own contract can feel liberating, but that level of freedom can also lead to overlooking important details.
We recommend hiring an experienced real estate attorney to assist in crafting your rent-to-own agreement, and then keep them in the loop throughout negotiations all the way up to signing.
You don’t want to discover you’re leaving something out that has the potential to escalate a disagreement into full-blown litigation.
Pro: Eliminate Market Competition
One of the unique benefits of using a rent-to-own contract when selling your home is that you’re immediately putting your property in a different market position.
Sellers that are offloading their homes through traditional sales are a different beast compared to the owner that chooses to take a completely different route to selling property. By advertising your home as being sold as rent to own, you’re going to be dealing with a different sort of clientele.
Reducing the number of homes you’re in competition with on your local market allows you to have an elevated place in negotiations.
Con: Vetting Your Renter Is critical
When offers start coming in from renters, you will find yourself at a point where it’s incredibly crucial to both consider all sides of their offers as well as do everything to get to know their financial background and credit history.
Since the renter you decide to go with will be signing a binding contract that includes them paying you monthly rent as well as eventually having the option, or requiring them, to purchase your home, you need to know they have a solid financial footing to make that possible.
Pro: Steady Short-Term Income
Under normal conditions, a buyer would provide you with a sizable down payment at closing, but things are a little different with a rent to own agreement.
Your contract could stipulate that they pay you an option fee – usually between 2 and 7% of the agreed purchase price of the home – as well as rent credits. Rent credits are a portion of their monthly payment that is applied to the total purchase price of the home.
Keep in mind that both option fees and rent credits are typically non-refundable.
Con: Not Set in Stone
The one big point that tends to give sellers pause when considering a rent-to-own contract is that you are entering into an extended agreement with someone to hopefully eventually have them buy your home.
This requires an amount of trust and confidence in the buyer, and there are some sellers that are unwilling to stomach such a situation. There’s always that chance that the buyer will get cold feet and fail to live up to their end of the agreement.
Help With Your Rent to Own Agreement in Redlands
If you’re thinking of selling your house under a rent-to-own agreement but don’t know where to start, contact us today at (951) 232-9704!