There are four main ways people sell houses these days, each with their own Pros and Cons.
Most people know about selling with a realtor
Selling FSBO (For Sale By Owner) or even
Getting a cash offer from an investor looking to make a profit.
However, a little known secret, and potentially the way to squeeze the very most money out of your property possible is through a Lease-Purchase Option, also known as Rent-to-Own.
What is Rent-to-Own and why would I consider selling my house using this method? If you are wondering the same thing, you have come to the right place! We are going to break it down for you, and hopefully answer any questions you have. We're here to help you to determine if this method of selling makes the most sense for you at this time.
A lease-purchase option to buy is a two-part arrangement between a landlord and a tenant. There's the lease, which allows the tenant to rent and live in the home for a set period of time, and there's also the purchase option agreement. This gives the tenant the option to purchase the home at the end of their lease term for an agreed-upon price. Rent-to-Own is a method of selling your house wherein you rent your home to a Tenant-Buyer for a period of time before they complete the final purchase. This method allows you to have your mortgage payments covered by the monthly rent payments and often gives you some additional cash flow during the option period. The Tenant-Buyers consider themselves to be future owners of the property, so they take care of maintenance and tend to take much better care of your property than a typical renter would.
Below we answer some of your frequently asked questions about selling on a Rent-to-Own basis:
What sort of Down Payment do the Buyers have?
We only work with quality tenant-buyers who have 1%-3% of the purchase price as a lease option fee - more if we can. This is where we make our money so our goal is to get a much as possible. Also, the more we get as a down payment, the more stable the tenant-buyer is for you, so it benefits us both.
Do all Buyers complete the purchase transaction at the end of the lease period?
No, not all tenant-buyers will exercise their option to purchase at the end of the lease. But there are still some real benefits to you, even if they don't.
What happens to the Buyer's Down Payment if they walk away from the Purchase?
The option fee paid by the tenant-buyer is non-refundable. So, if they walk away, they are out a sizeable sum. This has proven to be one of the motivators that keep tenant-buyers in the agreement all the way to close of escrow.
Who is responsible for upkeep and repairs?
Your tenant-buyer takes care of all maintenance and upkeep as well as reasonable repairs. (Major repairs, such as new roof, foundation repair, etc. remain the responsibility of the homeowner.)
What are the Pros and Cons of selling my house via the full-price system?
You get your full asking price (or more in some cases).
You keep an asset that produces monthly cash flow.
You get a quality tenant-buyer to care for your property. (All tenant-buyers must undergo our strict filtering process.)
There are hundreds of quality (often overlooked) buyers looking for an opportunity to quit renting and start owning.
Your mortgage, property taxes, and insurance are covered.
You normally get higher-than-usual rental income.
You continue to receive the tax benefits/deductions of home ownership.
You can move on with your life knowing that the home is sold.
The closing of the sale is delayed for a period of time.
In some cases the tenant-buyer will not carry the purchase to completion (in those cases, you are free to find another tenant-buyer or put your home on the market).
You don't have access to the equity in your home right away.
Your house needs to be "move-in ready" with no deferred maintenance or renovations needed.