Rent-to-own home?
March 27, 2007 9:46 AM
Great housing deal?
We currently rent a decent yet smaller house and have 2 children. While ideally we'd like more space, our landlord has offered what seems to be a great deal. He'll let us use the past 9 month's rent as down payment on the house if we buy it from him.
It's in a great school district with lots of new development in the area.
I realize I need to compare 'comps' in the neighborhood, and have it inspected, but is there more I need to be aware of? I have previously owned a bigger house in my old town.
We currently rent a decent yet smaller house and have 2 children. While ideally we'd like more space, our landlord has offered what seems to be a great deal. He'll let us use the past 9 month's rent as down payment on the house if we buy it from him.
It's in a great school district with lots of new development in the area.
I realize I need to compare 'comps' in the neighborhood, and have it inspected, but is there more I need to be aware of? I have previously owned a bigger house in my old town.
There could be a lot of things in the negative column, but also remember that you'll be saving on mover's fees and utility deposits. And it will be a lot less hassle. Plus the instant equity you'll have from your nine months.
But you want more space. Those savings won't really matter if you feel the need to move again in two years. Could you get an architect in to look at ways to expand the space before you have to make a decision.
posted by saffry at 10:26 AM on March 27, 2007
But you want more space. Those savings won't really matter if you feel the need to move again in two years. Could you get an architect in to look at ways to expand the space before you have to make a decision.
posted by saffry at 10:26 AM on March 27, 2007
This is just the housing market getting soft. Maybe he'd like to be rid of his investment and take his profits now instead of waiting.
Nothing to worry about in theory. I've seen deals like this before (in my *very* limited experience), though I've never seen one through or know anecdotes about it worked out.
posted by zpousman at 10:27 AM on March 27, 2007
Nothing to worry about in theory. I've seen deals like this before (in my *very* limited experience), though I've never seen one through or know anecdotes about it worked out.
posted by zpousman at 10:27 AM on March 27, 2007
Is he going to owner finance it then? A bank will not consider the past rent payments as a down payment - they'll still be looking for 10-20% down. He'll have to esentially give that money back to you so it can become the mortgage down payment, I think.
If you have really good credit and can get a zero down mortgage, then the sunk cost applying to the purchase price is a good deal...if he isn't jacking up the sell price by an equal amount.
If it were me, I think I'd evaluate if I want to buy the house regardless of the potential deal first. And definitely get a home inspection. Nine months rent credit is not a great deal if you have to replace the roof next year!
posted by COD at 10:42 AM on March 27, 2007
If you have really good credit and can get a zero down mortgage, then the sunk cost applying to the purchase price is a good deal...if he isn't jacking up the sell price by an equal amount.
If it were me, I think I'd evaluate if I want to buy the house regardless of the potential deal first. And definitely get a home inspection. Nine months rent credit is not a great deal if you have to replace the roof next year!
posted by COD at 10:42 AM on March 27, 2007
One other consideration for the current owner is the savings he'll realize by not paying a realtor.
posted by Mitheral at 10:50 AM on March 27, 2007
posted by Mitheral at 10:50 AM on March 27, 2007
If he is offering owner financing, make sure he isn't overcharging you on the interest rate, and that you won't have a prepayment penalty. 3rding the home inspection suggestion, there might be a big expense on the horizon that you don't know about. Check on back taxes, special assesments, and homeowner's association fees too.
posted by yohko at 11:15 AM on March 27, 2007
posted by yohko at 11:15 AM on March 27, 2007
Do everything you would do if you were buying a house in the traditional way plus make sure he is not offering a "Contract for Deed" which means he holds the deed until you pay him off completely. Those are never good for consumers because the owner can put the house up for collateral on a loan even while you're paying on it.
posted by BluGnu at 11:54 AM on March 27, 2007
posted by BluGnu at 11:54 AM on March 27, 2007
I'm wondering if there's a city or bank inspection he'd avoid by financing it himself or selling it to existing tenants. So you might make sure with your inspectors that the house meets building and zoning codes.
It's possible that city ordinances won't let him evict tenants to sell a house, another reason he might want to sell it to you.
posted by salvia at 2:44 PM on March 27, 2007
It's possible that city ordinances won't let him evict tenants to sell a house, another reason he might want to sell it to you.
posted by salvia at 2:44 PM on March 27, 2007
sounds like a good deal, but be wary of what's too good to be true
get a real estate agent to represent you regardless....
If you're going to go for it then don't let the 9 mos rent keep you from the home you really want
with the housing market soft (and it looks like it could outright tank if foreclosures and this subprime thing keep up) then you could very well get a sweet deal on another, better place....
but if you don't have the money yet for a down payment, and this is only going to work cause he is allowing the rent to be down payment, then maybe it's worth going for...
or just save up
but yeah, get a good realtor to represent you, they might be aware of trends in your market that you might not know about....it could be a soft market or he could know something that you don't....
posted by Salvatorparadise at 7:08 PM on March 27, 2007
get a real estate agent to represent you regardless....
If you're going to go for it then don't let the 9 mos rent keep you from the home you really want
with the housing market soft (and it looks like it could outright tank if foreclosures and this subprime thing keep up) then you could very well get a sweet deal on another, better place....
but if you don't have the money yet for a down payment, and this is only going to work cause he is allowing the rent to be down payment, then maybe it's worth going for...
or just save up
but yeah, get a good realtor to represent you, they might be aware of trends in your market that you might not know about....it could be a soft market or he could know something that you don't....
posted by Salvatorparadise at 7:08 PM on March 27, 2007
This thread is closed to new comments.
You need to get everything in writing of course, and make sure the price he wants is not insane. Find out what percent downpayment it would be, and what a monthly mortgage payment on the rest would be compared to the current rent you pay now.
posted by Pastabagel at 10:00 AM on March 27, 2007