Lease Purchase or rent to own

[ryanjoseph]

What is the name of your state (only U.S. law)? LA

Sorry if this question was already asked but i searched and could not find it. Me and my wife are selling our home by owner. Someone is interested in leasing the house. We told them we would look into it. Can someone explain the difference between rent to own and leasing a house ? Thanks in advance

[LindaP777]

It depends on how it's written and the money required.

This is how we typically do my lease with options.

The details of the sale of the property have been predetermined (sale amount and future closing date), all we are doing is delaying the closing until a time better suited for the buyer.

The buyer typically pays $2000 (two thousand dollars) in consideration of the option to hold to price of the house. Any appreciation up until closing would be the buyers (not the owner). This option money is not a security deposit nor is it under any circumstance refundable. It will only be applied in the form of a down payment at closing. Buyer can close anytime within the lease period, with no penalty.

Property taxes are paid by me (the owner of record), as well as any HOA fees (if any) until you close on the house. The maintenance, however is your responsibility. I thoroughly go over each house before a lease with option to make sure there are no current problems (if there are, I fix them before we enter into the lease with option).

When rent is paid on time (by or before the 1st of each month) Landlord agrees to apply $100 per month as a "landlord's Consideration" towards the purchase of the house, up to a maximum of $1200 (12 months X $100). If tenant does not purchase house within the time frame agreed upon, none of this money will be paid. If purchaser obtains financing prior to the end of the contract, there will be no penalty & all monies paid under the Landlords Consideration towards the purchase of the house to date, shall be paid to the purchaser at closing.

Security deposit is paid as with any lease. If you buy the house, it is also applied to your down payment at closing. If you change you mind for any reason, the security deposit will be used to cover any unpaid rent, late fees or damage until termination of the lease.

[ryanjoseph]

Let me make sure i am understading this correctly. So let's say we are selling the house for $100,000. Our monthly note is around $1100 with insurance included. They agree to buy the house in 2 years. So i could ask $2000 to hold the price of the house, which in 2 years would be given back to them for a down payment at closing. What is they backed out, is this also non refundable ? What about rent ? Would i ask 1200 and put the 100 landlord's Consideration aside or could i ask around 1300 ? So at the end of the 2 years i would give the 2400 back to them but if they backed out then it is non refundable. I can also collect a security deposit and at he end of 2 years it is used as down payment at closing or if they back out then it would cover rent etc.

[ryanjoseph]

Oh one more question. We have to have this all through an attorney right ? Who pays for the attorney cost ? What about the closing cost ?

[LindaP777]

I, personally, do not use an attorney for a lease with option, but I do them regularly. If you want to private message me, I can send you copies of my lease and lease with option (2 documents used together).

In my LWO, the option money is non-refundable if they back out. The security deposit would be used for any damages done to the unit, just like in any rental situation.
Rent doesn't have anything to do with your mortgage payment. rent should be what the going rate is. Here in Ohio, my rents are always more than the mortgage, but I know that's not always the case.
$100 per month landlords consideration, the $2000 LWO deposit and the secuirty deposit all goes back to your tenant at closing when they buy the house.

[ryanjoseph]

I sent you a pm. Thanks again

[nextwife]

To sell a financed home without paying off the mortgage, the current lender must be agreeable (if the loan carries a due on transfer clause).

[FlyingRon]

Originally Posted by nextwife

To sell a financed home without paying off the mortgage, the current lender must be agreeable (if the loan carries a due on transfer clause).

In many cases you also need consent to lease as well.

[LindaP777]

Originally Posted by nextwife

To sell a financed home without paying off the mortgage, the current lender must be agreeable (if the loan carries a due on transfer clause).

In Ohio, it's not required to record the lease with option. A land contract is required to be recorded, but not a lease with option to purchase. It's just a lease . . . with an option to purchase (and the buyer would get his own financing at that time, with a proper closing).

[ryanjoseph]

Originally Posted by LindaP777

In Ohio, it's not required to record the lease with option. A land contract is required to be recorded, but not a lease with option to purchase. It's just a lease . . . with an option to purchase (and the buyer would get his own financing at that time, with a proper closing).

What if at the end of the lease contract the buyer tries to get financing and is denied ?

[LindaP777]

Originally Posted by ryanjoseph

What if at the end of the lease contract the buyer tries to get financing and is denied ?

That's the primary purpse of the lease with option ~ to give them a chance to build/clean up their credit and establish work history.

At the bottom of the lease with option I sent you, it says;

"A note to potential purchaser:
To insure that you will be able to get a loan for this house, you should contact a mortgage consultant of your choice, now, so he can tell you what you need to do to insure your ability to get a loan in the future. You may need to have several months established with a bank account or charge card to be considered creditworthy. It is not the owners responsibility to help find a loan, or to establish credit worthiness before entering into this contract with purchaser. It is the purchaser’s responsibility to make sure his credit is good enough to get a loan before the 12 months is up."

[LindaP777]

You also have the option of extending the lease with option for another 12/24 months and I would certainly do that, if they were good tenants and had met all their obligations under the lease.

[ryanjoseph]

Thank you, we are working on something right now.

[HomeGuru]

Originally Posted by ryanjoseph

What is the name of your state (only U.S. law)? LA

Sorry if this question was already asked but i searched and could not find it. Me and my wife are selling our home by owner. Someone is interested in leasing the house. We told them we would look into it. Can someone explain the difference between rent to own and leasing a house ? Thanks in advance

**A: use an attorney.