Here is a good example of the matter that could arise:
You discover a rent to own house available, currently worth around $200,000. You sign an option contract at the purchase price of $200,000. Two years go by and you are ready to close on the house. Values have come down slightly in the region and the residence just appraised at $180,000.
What should you do at this point? There are some different choices open to you as the tenant/buyer and in addition they need to be written out within the option contract you signed upfront.
Tenant/Buyer pays the difference - There's a $20,000 difference between the option price and evaluated amount. Right after cutting down $7,000 to get a 3.5% option fee and $6,000 for Twelve months of rent credits at $500 per month(while in the first year only) you've got to pay $187,000 to buy the home. If the loan company will loan $180,000 for the property, then you have the OPTION of paying the $7,000 difference the loan company won't handle. Take into account that you would continue to have settlement costs. Normally a tenant/buyer would not have enough money or wouldn't be willing to pay so much more out-of-pocket to close on the residence.
Lengthen Option Time - The following can and really should be negotiated in the agreement. In the event you qualify for financing during the option period but the house is appraising for less than the decided on sticker price, you have the power to extend the option period by a specific amount of time(normally 12-24 months).
Owner Lessens Price - Another possibility is the seller agrees to lower the initial option amount to just what the property is currently really worth(assessment amount). Don't assume this to take place. This is simply not required of the seller but they could possibly be motivated to offer the place to you personally and proceed.
Seller takes the house back - This outcome is just as simple as the title. The owner can and often times will take the property back and you lose the entire equity you had in your home For anyone who is in a situation similar to this plus the residence appraises for less than the sales price, then stretching the option period would typically greatest outcome. If you no longer want the home and then you'll be able to just re-locate. You will need good lease and option legal agreements!
Remember this - Historically the housing market is headed up annually. One of the MAJOR features of a rent to own would be the chance for building EQUITY without needing the credit to be eligible for home financing. As an illustration if your $200,000 residence you moved into is worth $250,000. You still purchase the home for the initial option price of $200,000. So you hold the $50,000 equity in addition to your upfront option payment and rent credits!
You discover a rent to own house available, currently worth around $200,000. You sign an option contract at the purchase price of $200,000. Two years go by and you are ready to close on the house. Values have come down slightly in the region and the residence just appraised at $180,000.
What should you do at this point? There are some different choices open to you as the tenant/buyer and in addition they need to be written out within the option contract you signed upfront.
Tenant/Buyer pays the difference - There's a $20,000 difference between the option price and evaluated amount. Right after cutting down $7,000 to get a 3.5% option fee and $6,000 for Twelve months of rent credits at $500 per month(while in the first year only) you've got to pay $187,000 to buy the home. If the loan company will loan $180,000 for the property, then you have the OPTION of paying the $7,000 difference the loan company won't handle. Take into account that you would continue to have settlement costs. Normally a tenant/buyer would not have enough money or wouldn't be willing to pay so much more out-of-pocket to close on the residence.
Lengthen Option Time - The following can and really should be negotiated in the agreement. In the event you qualify for financing during the option period but the house is appraising for less than the decided on sticker price, you have the power to extend the option period by a specific amount of time(normally 12-24 months).
Owner Lessens Price - Another possibility is the seller agrees to lower the initial option amount to just what the property is currently really worth(assessment amount). Don't assume this to take place. This is simply not required of the seller but they could possibly be motivated to offer the place to you personally and proceed.
Seller takes the house back - This outcome is just as simple as the title. The owner can and often times will take the property back and you lose the entire equity you had in your home For anyone who is in a situation similar to this plus the residence appraises for less than the sales price, then stretching the option period would typically greatest outcome. If you no longer want the home and then you'll be able to just re-locate. You will need good lease and option legal agreements!
Remember this - Historically the housing market is headed up annually. One of the MAJOR features of a rent to own would be the chance for building EQUITY without needing the credit to be eligible for home financing. As an illustration if your $200,000 residence you moved into is worth $250,000. You still purchase the home for the initial option price of $200,000. So you hold the $50,000 equity in addition to your upfront option payment and rent credits!
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Want to find out more about rent to own, then visit Cole Haynes's site on how to choose the best rent to own homes in Florida for your needs.
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