Selling a home on terms can be a great way to find a buyer and get a check in under 30 days. For those of you that have read my article “what is rent to own”, you are already familiar with the process. This can be a very effective technique to sell a home quickly, especially one that has a large mortgage. However, if this method is not done with skill and precision, the results can be disastrous. This is not something that should be attempted by a weekend warrior, or someone with little experience.
Below are 4 reasons why rent to own should be done with a professional:
#1. Speed Is A Top Priority
Usually a homeowner will sell on a lease with the option to buy because they have a very high mortgage balance and monthly payment. This precludes an investor from buying for cash, unless the home owner can write a large check at closing. If the home has a large mortgage and is being sold by an agent, the owner may be required to come to the closing table with money to pay the cost of sale. Many times, the seller may be having trouble making the mortgage payment. This is why speed is so critical. Proper marketing and deal structuring is essential to putting together a rent-to-own transaction quickly and smoothly.
#2. Paperwork Must Be Clear And Correct
The paperwork is where everyones’ responsibilities and expectations are set out. It is imperative that you use accurate paperwork for the state in which you are performing this kind of transaction. We have all heard horror stories about renting our homes out to strangers. Renting your home to a stranger with an option to buy can be a nightmare if not done properly. You must have solid agreements if you ever wind up in court. Simply pulling an example contract off the internet will not work!
#3. Tenant Buyers Must Be Screened
All prospective tenants must be screened thoroughly while abiding by federal and state fair housing laws. You’ll need access to a credit screening system to run a credit check. Pulling someone’s credit is a delicate matter with all the non-disclosure and fair housing laws regarding denying someone housing. Save yourself the hassle and let a professional do this for you. You should have the final approval of your prospective tenant anyway.
#4. Eviction Can Go Into Appellate Court
As a buyer of rental property, I am no stranger to eviction court. I have learned some hard lessons and now I am very thorough from the beginning. In the state of North Carolina, the eviction process takes about 30 to 45 days to completely evict someone from your property. This can easily lead to the loss of 2 months’ rent. However, when you sell a tenant buyer the option to buy, you can wind up in an appellate court, which is a long an expensive process. I recently met up with a seller who looked me in the eye and told me: “I’ve researched rent to own online I’m just gonna do it myself!” I wish that person all the best of luck.