My landlord is motivated by cash. I want to buy this house and make it my tiny crap-hole. Help?
March 9, 2012 6:16 AM Subscribe
I've been given the option to rent-to-own the house we live in, which I love. Can you hope me navigate this and thus, prevent me getting royally taken by my millionaire and slightly unstable landlord?
We have lived in our small yet sweet little house in our tiny town for the past 4 or 5 years. I rent (very cheaply) and my landlord, who's a little off, is going to sell the house. Because she is almost certainly certifiably insane she had previously asked 80 grand...for our very old, 850 sq. foot abode, residing in an area where that figure does not match similar property values.
Last night, she miraculously got momentarily sane and is now asking $30,000. She'd prefer that I get a home loan for this purchase but I have horrible (seriously, HORRIBLE) credit and tens of thousands of dollars in student loan debt so that's just not feasible and will not be for the foreseeable future. However, she has agreed to a $5000 down payment and an increase in the rent, essentially giving me the opportunity to rent-to-own this home.
I grew up on the street where this house resides and am incredibly fond of it. My parents own the home across the street and it's safe and nice here for my young son. I'd really like to stay here but she is selling the house regardless of what I decide in a year and a half.
My questions are these:
Have you ever rented-to-own a home?
This house and the 1/4 acre lot it sits on are certainly worth $30,000. I can afford the down payment in a year. I'd be stupid to pass this up, yes? Especially given my credit history and inability to get a home loan?
My landlord has recently replaced the roof on the house and installed a new, more efficient heating system. This is good for me if I'm buying this place, yeah?
I've already talked to a realtor that's willing to help me navigate this deal but I know so very little about this sort of thing, I'm really just looking for any experiences anyone on the green has had with a situation like this. You are not a lawyer, yes I know, but your thoughts would be great...
We have lived in our small yet sweet little house in our tiny town for the past 4 or 5 years. I rent (very cheaply) and my landlord, who's a little off, is going to sell the house. Because she is almost certainly certifiably insane she had previously asked 80 grand...for our very old, 850 sq. foot abode, residing in an area where that figure does not match similar property values.
Last night, she miraculously got momentarily sane and is now asking $30,000. She'd prefer that I get a home loan for this purchase but I have horrible (seriously, HORRIBLE) credit and tens of thousands of dollars in student loan debt so that's just not feasible and will not be for the foreseeable future. However, she has agreed to a $5000 down payment and an increase in the rent, essentially giving me the opportunity to rent-to-own this home.
I grew up on the street where this house resides and am incredibly fond of it. My parents own the home across the street and it's safe and nice here for my young son. I'd really like to stay here but she is selling the house regardless of what I decide in a year and a half.
My questions are these:
Have you ever rented-to-own a home?
This house and the 1/4 acre lot it sits on are certainly worth $30,000. I can afford the down payment in a year. I'd be stupid to pass this up, yes? Especially given my credit history and inability to get a home loan?
My landlord has recently replaced the roof on the house and installed a new, more efficient heating system. This is good for me if I'm buying this place, yeah?
I've already talked to a realtor that's willing to help me navigate this deal but I know so very little about this sort of thing, I'm really just looking for any experiences anyone on the green has had with a situation like this. You are not a lawyer, yes I know, but your thoughts would be great...
Get it in writing!
posted by St. Alia of the Bunnies at 6:23 AM on March 9, 2012 [6 favorites]
posted by St. Alia of the Bunnies at 6:23 AM on March 9, 2012 [6 favorites]
Yeah, this is called a land contract. Usually you can find a title company in your area that will prepare the documents and otherwise walk you through the process relatively cheaply. Here's one near me. There's probably one near you! Do not do this without getting something in writing, but it sounds like a good deal for you.
posted by dpx.mfx at 6:35 AM on March 9, 2012
posted by dpx.mfx at 6:35 AM on March 9, 2012
I was investigating this option from the landlord's POV. Rent-to-own deals are potentially great, but until you've got the house, remember that everything is tilted in favor of the landlord. Usually, these contracts stipulate that you need to take over all maintenance that doesn't render the house uninhabitable (e.g., roof falls in = landlord, but window replacement = you), and you may lose everything you've put in if you miss a payment. Meanwhile, the landlord is still getting all the tax-related goodies. So have your lawyer read the contract with a steely eye. If you're not going the mortgage route, you may be in a better position, in the sense that these deals usually collapse when the renter reaches the contract deadline & discovers that s/he cannot get bank financing.
posted by thomas j wise at 6:46 AM on March 9, 2012
posted by thomas j wise at 6:46 AM on March 9, 2012
Seriously, you gotta lawyer up. It's quite common for a rent-to-own person such as yourself to make payments for years, then find out that the landlord/owner hasn't kept up on her mortgage, her bank is going to foreclose, and you're going to get kicked out (plus you're not getting back the down payment or extra rent.)
Get a lawyer, and get everything in writing.
posted by spacewrench at 6:48 AM on March 9, 2012 [3 favorites]
Get a lawyer, and get everything in writing.
posted by spacewrench at 6:48 AM on March 9, 2012 [3 favorites]
Best answer: I am a lawyer, though not yours, and not likely licensed in your state. You absolutely need a lawyer for this. True, its' going to cost you money, but you face the prospect of losing both your home and any equity you may have in it if you don't do this right.
Think about it this way: You are negotiating the sale of a home. The fact that's slightly non-traditional should not prevent you from treating this with all the care and precautions that you would if you were getting a mortgage.
Which, in a sense, is actually what you're doing. What's she's proposing is actually less a rent-to-own situation and more like seller financing, i.e. you're getting a mortgage, only it's from the seller, not from a third-party creditor. Rent-to-own situations generally don't involve down payments, and you lose all your equity if you move before the contract term is up. The way they work is that if you pay rent for a certain amount of time, title to the home is transferred to you at the end of that time. Whereas by asking for a down payment, you should probably insist on taking title to the home while granting her a security interest like any bank would take.
Or maybe not. Depends on what the two of you can work out. But you're going to need a lawyer to make sure you don't get screwed, not because she's trying to screw you, but because neither you nor she know how these things actually work. If you don't have someone there to explain the what the contract actually means, you could wind up with a situation that neither if you wants.
Lawyer up. Should only cost a few hundred bucks, and hey, maybe that's something that can be included in the purchase price.
posted by valkyryn at 6:49 AM on March 9, 2012 [5 favorites]
Think about it this way: You are negotiating the sale of a home. The fact that's slightly non-traditional should not prevent you from treating this with all the care and precautions that you would if you were getting a mortgage.
Which, in a sense, is actually what you're doing. What's she's proposing is actually less a rent-to-own situation and more like seller financing, i.e. you're getting a mortgage, only it's from the seller, not from a third-party creditor. Rent-to-own situations generally don't involve down payments, and you lose all your equity if you move before the contract term is up. The way they work is that if you pay rent for a certain amount of time, title to the home is transferred to you at the end of that time. Whereas by asking for a down payment, you should probably insist on taking title to the home while granting her a security interest like any bank would take.
Or maybe not. Depends on what the two of you can work out. But you're going to need a lawyer to make sure you don't get screwed, not because she's trying to screw you, but because neither you nor she know how these things actually work. If you don't have someone there to explain the what the contract actually means, you could wind up with a situation that neither if you wants.
Lawyer up. Should only cost a few hundred bucks, and hey, maybe that's something that can be included in the purchase price.
posted by valkyryn at 6:49 AM on March 9, 2012 [5 favorites]
You don't need a realtor in this case (realtors sell and your sale is already ready to go), but you do need a lawyer.
posted by ssg at 6:51 AM on March 9, 2012 [1 favorite]
posted by ssg at 6:51 AM on March 9, 2012 [1 favorite]
Assuming you are in the US have you explored the possibility of getting an FHA mortgage? A mortgage on 30,000. is going to be less than 200 a month. Don't assume your credit is so bad that you won't qualify. Find out which local bank handles FHA mortgages and talk to them. Is there any chance a family member would like to buy the house with you?
posted by mareli at 7:09 AM on March 9, 2012 [4 favorites]
posted by mareli at 7:09 AM on March 9, 2012 [4 favorites]
You do need a lawyer. Really. It's not a bad deal, at all, if the sales price is reasonable and the terms are satisfactory, and you have good documentation of the terms of the sale. For the last thing, you need a lawyer.
I worked as a lawyer for a client who did these sorts of sales often, and, assuming you're in the US (and not in Louisiana) valkyryn (as usual in the law questions) is right. With a down payment, you're not renting to own, you're buying. You're just not doing the traditional bank mortgage that you see in US home purchases. This scenario (small down payment, transfer of title, registration of a lien, monthly installments on the balance, no appreciable interest) is common in sales of homes within families; it won't be unfamiliar to a real estate lawyer. But to protect both of your interests, you need to see a lawyer.
A local bar association will have a list of lawyers who practice in this area, but I always recommend asking friends, neighbors, coworkers if they have ever hired an attorney to handle an unusual real estate transaction and would they recommend that person. If you've ever hired an attorney for anything else, ask them who they recommend (attorneys refer friends and colleagues all the time, sometimes they are allowed to pay one another for the referral. Usually, attorneys still only refer competent or excellent attorneys because it's bad for their own business if they refer bad ones, but accepting a referral is always a leap of faith.)
Good luck! Enjoy it.
posted by crush-onastick at 7:39 AM on March 9, 2012 [1 favorite]
I worked as a lawyer for a client who did these sorts of sales often, and, assuming you're in the US (and not in Louisiana) valkyryn (as usual in the law questions) is right. With a down payment, you're not renting to own, you're buying. You're just not doing the traditional bank mortgage that you see in US home purchases. This scenario (small down payment, transfer of title, registration of a lien, monthly installments on the balance, no appreciable interest) is common in sales of homes within families; it won't be unfamiliar to a real estate lawyer. But to protect both of your interests, you need to see a lawyer.
A local bar association will have a list of lawyers who practice in this area, but I always recommend asking friends, neighbors, coworkers if they have ever hired an attorney to handle an unusual real estate transaction and would they recommend that person. If you've ever hired an attorney for anything else, ask them who they recommend (attorneys refer friends and colleagues all the time, sometimes they are allowed to pay one another for the referral. Usually, attorneys still only refer competent or excellent attorneys because it's bad for their own business if they refer bad ones, but accepting a referral is always a leap of faith.)
Good luck! Enjoy it.
posted by crush-onastick at 7:39 AM on March 9, 2012 [1 favorite]
You need a lawyer. That contract could be tricky - and you don't know what you don't know. You know?
And I'd get a home inspection too. Just because you want to know the condition and what to keep an eye (and budget) out for.
You don't have to make it weird and confrontational. But it's still a pretty significant purchase and you want to remember that and just make sure that you're keeping your eyes open and head up.
posted by mrs. taters at 8:20 AM on March 9, 2012
And I'd get a home inspection too. Just because you want to know the condition and what to keep an eye (and budget) out for.
You don't have to make it weird and confrontational. But it's still a pretty significant purchase and you want to remember that and just make sure that you're keeping your eyes open and head up.
posted by mrs. taters at 8:20 AM on March 9, 2012
Everyone else has much better knowledge and advice to me -- but I can step in and say that yes, I've done something like this (buying a building from my ex's family) And trust me, even if dealing with sane people who love you pretty much unconditionally, you want it in writing, just in case. It saved us a lot of trouble. And by a lot, I mean... A LOT. Get a lawyer and you'll all be happier, no matter what.
But I don't say this to scare you off. It sounds like a great deal that is worth jumping through more than a few hoops to guarantee your happiness. I think the answer to "I'd be stupid to pass this up, yes?" is, if you want it, a big "yes." (though I wouldn't call you stupid...foolish maybe) Good luck!
posted by MCMikeNamara at 10:29 AM on March 9, 2012
But I don't say this to scare you off. It sounds like a great deal that is worth jumping through more than a few hoops to guarantee your happiness. I think the answer to "I'd be stupid to pass this up, yes?" is, if you want it, a big "yes." (though I wouldn't call you stupid...foolish maybe) Good luck!
posted by MCMikeNamara at 10:29 AM on March 9, 2012
Seconding the home inspection. It'll cost a couple hundred, but he will get into all the scary dark nooks and find the Serious Problems (usually involving water leaks and/or structure rot) that you at least need to know about.
posted by intermod at 10:07 PM on March 9, 2012
posted by intermod at 10:07 PM on March 9, 2012
This thread is closed to new comments.
I bought 2 houses this way, and it worked out fine. You do need a lawyer to make sure the contract meets your needs.
posted by The Deej at 6:23 AM on March 9, 2012