We find that even though many Roanoke Buyers are interested in Rent To Own transactions most do not fully understand the transactions at first, not to mention how to tell if it is structured properly. Here we will discuss the basic structures of a Rent To Own / Lease Option transaction so you know what to look for when buying your next home.
Lease – A contractual agreement between the Lessor/”landlord” and a Lessee/”Tenant”
Option – An option is the right to convey a piece of property. The person granting the Option is called the optionor (or more usually, the grantor) and the person who has the benefit of the option is called the optionee (or more usually, the beneficiary).
Lease With Option To Purchase – This type of transaction consists of a Lease for a specific time as well as a SEPARATE Option for the same term. The price can be locked in at signing or set according to market price, appraisal value, loan balance, etc. at the time the optionee/buyer exercises the option to purchase. This is not to be confused with a Lease Purchase which “locks” you into purchasing the home by the end of the lease. The Option gives the optionee/buyer the right to purchase but does not obligate them to purchase.
Types of Rent To Own/Lease Option Transactions:
Traditional Rent To Own/Lease with Option to Purchase
This is the most common structure for our transactions. Families who opt for the traditional Rent To Own are usually very close to qualifying for a mortgage but still need some time to rebuild credit or pay down debt. The lease and option term is usually 1 -3 years and the option consideration is usually 3% – 5%.
Long-Term Rent To Own / Lease with Option to Purchase
Long-Term Rent To Own is less common but is highly beneficial for families that have experienced divorce, bankruptcy, foreclosure, etc. or have very high debt or very low credit and need more than 3 years to qualify for a mortgage. This structure behaves a lot like owner financing because the lease and option period are typically 10 years or more and the price is the loan balance at closing which means that you’re not locked into today’s pricing and any equity that is built is yours to keep.
Regardless of which structure is used REsolutions Real Estate Services provides quality homes in great neighborhoods within the highest rated school systems so you’re sure to find a home that fits your family’s needs. Now that you have a better understanding of what Rent To Own is visit www.Rent2OwnVA.com to explore the benefits to buying a home as a Rent To Own and learn how our process works.
– Chad Corbett, President REsolutions Real Estate Services