Sellers FAQ – Rent to Own Process in Maryland
Frequently Asked Questions
General questions about our company, service, and properties we offer on this website:
- What does Rent to Own actually mean?
- Why should I sell my house as a Lease Purchase?
- How do I get my asking price?
- How much am I going to be charged?
- I’m not sure about tenants. Will they damage my property?
- How do you market for tenant buyers?
- Why shouldn’t I use a Realtor?
- Who handles the maintenance?
- What about taxes and insurance?
- How soon can the tenant buyer typically qualify for a mortgage?
- I’ve had bad experiences with tenants. How will this be different?
- What if the tenant buyer decides not to buy?
- What if the tenant buyers circumstances change and they can’t close on the property?
What does Rent to Own, Lease Purchase, Lease Option actually mean?
In most cases, a rent to own agreement is a contract on a property that works like a lease and leads to a purchase. It’s often called a lease with an option – or a lease/option agreement for short.
The lease portion is a standard rental agreement that includes monthly rent, and other typical terms.
The option in the contract gives you the right to purchase the property after a set time period – usually around 3 years. This gives you the ability to save money towards a down payment, repair credit, increase your income, or otherwise improve your ability to qualify for a mortgage.
Most of the time people use a traditional mortgage loan to purchase the property prior to the expiration of the option period, but there are other options if your financial situation has unique needs. Rent to Own allows you to have your mortgage paid for, plus have extra cash flow every month in some cases.
Why Should I Sell My House As A Lease Purchase?
- Debt Relief: Someone else is making your mortgage payments
- Our Services Are Free & No Obligation: Our services cost you nothing. We collect our money from the tenant’s option fee up front. We will aggressively market your home until we find a qualified tenant, which you approve. You can even still try to sell the home yourself and if you find a buyer before we do, our contract terminates & you won’t owe us anything.
- Complete Tenant Buyer Screening: We help you do a complete background check on all of our applicants. We check their credit history, employment history, rental history, debt to income ratio etc. We call all of their provided references. We require all of our tenants to work with our mortgage broker and go through their credit restoration program.
- Your Property Will Be Taken Care Of: You will get a tenant that is going to take better care of the property than a regular tenant would. This is because they will have a larger ownership interest in the property, and tend to show more of a pride in home ownership.
- Maintenance Handled By Tenant-Buyer: Your tenant will be responsible for all day-to-day maintenance and repairs up to $500 each month. We also request you purchase a home warranty at the beginning of lease term which is allowed to be used by the tenant. This prevents unnecessary calls in the middle of the night to fix a leaky toilet.
How Do I Get My Asking Price?
You are offering the tenant a set price at some future date. They are willing to pay a premium for your home. They know the price and they know there is no negotiation.
How Much Am I Going To Be Charged?
ZERO DOLLARS – NOTHING! We get paid by the tenant in an assignment fee. We assign the Lease Option to the tenant and they pay us an assignment fee. It costs you nothing!
I’m Not Sure About Tenants. Will They Damage My Property?
The great thing about the tenant in a Lease Purchase, is that they are intent on exercising their option. They realize that they have paid non-refundable money as an option fee to us if they don’t purchase the house by the end of the lease term. They don’t want to damage something that will be theirs. Often the tenant may make upgrades or renovations to the property. The difference between a rent tenant and a rent-to-own tenant is that they are proud of their house and they care about it. It is similar to renting a car, and leasing a luxury car. If you rent a car, you are not too concerned if you hit a curb or something happens to it. You know you are going to return it and walk away. However, if you put down thousands of non-refundable dollars to lease an expensive car that could soon be yours, you are going to take VERY good care of it.
How Do You Market For Tenants?
We are always marketing for tenants. They come to us from ads, driving by our houses, referrals, or finding us on the Internet. This site alone receives a lot of traffic per month from tenants who complete profiles with interest in nice homes available for Rent to Own in Maryland.
Why Shouldn’t I Use A Realtor?
We aren’t against sellers using Realtors to sell their homes. We provide Lease Purchase as a creative option for sellers who may have already tried selling traditionally with a Realtor or who can wait a little longer to receive their full asking price and don’t want to pay Realtor commissions. We know that working with a Realtor keeps your home exposed to a pool of people (on the MLS) that may not need a lease purchase so selling with a Realtor may be the best option for you depending on your situation. However, keep in mind that Realtors charge 3-6% typically for selling your house. Using a lease purchase costs you absolutely nothing! We have members on our team with active Real Estate Licenses however we act as principals in a lease purchase transaction and do not charge commissions. Sometimes we actually work with some Realtors to help you, and will refer you to a Realtor if we feel our program isn’t right for you, or that your situation dictates using their services.
Who Handles The Maintenance?
The tenant is responsible for maintenance up to $500 each month. The tenant is not responsible for maintenance over $500/month because this is the owner’s responsibility until the tenant exercises their option to buy. We always recommend our Sellers purchase a Home Warranty which covers all major systems so that tenants can use the warranty if needed.
What About Taxes and Insurance?
You should contact your insurance agent for your specific needs, however, it is now considered a rental/investment property, and you can lower your coverage so as not to include items inside the house. You are responsible for tax and insurance payments. As far as tax benefits, until the financing is complete for the tenant, the house is considered an investment property for tax purposes. There are great tax advantages to lease purchasing, including the fact that a large part of the money you bring in is tax deferred. Your tax advisor can discuss your particular situation with you.
How Soon Can The Tenant Typically Qualify For a Mortgage?
During our screening, we only select tenants to move in that a mortgage broker confirms can qualify for a mortgage within 12-15 months, Every case varies some, but in most cases, there are just blemishes on their credit that need to be resolved or removed. If the tenants need to have discrepancies on their credit report resolved, we require that they begin the process with a credit repair company before they are able to move in. This way we know the process is started, and it reduces the amount of time needed before they can qualify for a mortgage.
I’ve Had Bad Experiences With Tenants. How Will This Be Different?
The tenants that are approved or that come to us are not what you would typically think of as renters. The people that come to us are great people with great jobs, but something has happened in the past that has caused them to feel as if they can’t qualify for a mortgage. Most of the people that come to us have been paying quite a bit to lease nice homes in nice neighborhoods for sometime. The family and kids are established in the neighborhoods and schools, and now the family is tired of leasing and ready to lease purchase, but they just need a small cushion of time.
What If The Tenant Decides Not To Buy?
This is highly unlikely, as the tenant has two major ties to the property. A financial tie, and an emotional tie. The financial tie comes from the fact that all of the money they have paid is non-refundable. This is normally thousands of dollars in most cases. The only way they will see that money again is if they close on the property. They would be better off to close on the property and then resell it themselves.
There are only three cases that we have come up with where someone may not purchase the property, and they are all pretty catastrophic situations.
- Loss of or transfer of job
We have purposely put everything into place in our program to get the tenant to close on the property. From the non-refundable option fee payment, to immediately putting them in contact with a mortgage broker.
What If The Tenant Buyers Circumstances Change And They Can’t Close On The Property?
If for some reason the tenant decided they couldn’t close on the property, the house is still yours and in your name. You may decide to use a lease purchase again, or you may decide to try to sell it on your own or go through a Realtor. The decision is yours. You are not contractually bound to anyone in any way. But we are here to help you in anyway that we can.
If you would like a Free No Obligation Lease Purchase Offer Proposal, fill out the form to get started now.