As the Rental Specialist for Howard Hanna in Wadsworth, Ohio, I am curious as to whether or not other areas are seeing an increase in lease-purchase (AKA "rent to own") clients.
- "So, Rhonda....WHAT ARE SOME OF THE ADVANTAGES OF A LEASE-PURCHASE TRANSACTION FOR THE SELLER?", you ask? The answer is easy!
* First and foremost, they've got someone in the home to watch over it in the seller's absence, keeping it from being subject the the horrors that can happen if a home is left vacant for even a short period of time.
Here in Ohio, a vacant home in the wintertime can be a very costly thing - frozen pipes can break in an instant and literally ruin a home if it isn't discovered quickly!
A beautiful but vacant local Italianate century recently caught fire, sustaining $200,000 in damages. Had it not been for the facts that a neighbor saw the smoke early-on and that the fire department was literally in the home's backyard, the home could well have burnt to the ground, taking the very close-by Victorians on each side with it (see photos for some of the damage!).
* The tenant will be more likely to take good care of the property, since they will eventually OWN it themselves! That, folks, is what we call a "vested interest"!
* Speaking of those tenants taking care of the house, the seller can also set up the rental portion of the agreement to reflect the tenant/buyer's responsibility for performing all maintenance and general upkeep of the property (this should also be stated in the purchase agreement, just so there's no question as to where those responsibilities lie). No muss, no fuss for the seller/landlord!
* If the seller creates the agreement to show that all deposits are non-refundable, the seller will get to keep the deposits, should the tenant/buyer not do what they needed to do to be able to qualify for their loan within the agreed-upon time frame.
* Since the seller is offering a program that is still fairly uncommon in practice, they may be able to fetch a higher price for their home in a lease-purchase arrangement, which is great for sellers who NEED to get a certain amount for their home to pay off outstanding loans on the property. Rents can be set to generate an income for the seller/landlord during the rental period, or part can be used toward what the tenant/buyer owes, lowering the balance in small increments monthly. That's up to the seller to decide (and for the they buyer to agree to)! At the very least, the seller should be able to have the mortgage covered by the rents paid by the tenant/buyer, which can be a real help for sellers who can't carry two mortgages without some sort of assistance.
* The seller still holds the deed until the transaction closes, so the seller maintains all of the tax benefits of owning the property.
Sure, we, the Realtor, might get paid many, many moons later if a property we have listed ends up selling as a lease-purchase transaction.
BUT, isn't that better than losing the listing due to expiration and seller frustration, or - worst case scenario - a seller losing the property in a foreclosure because they can't afford to keep it?
The lease-purchase can be a greatly beneficial tool, so don't be afraid to offer it as an option to your sellers!