Hoping I can get some help-
A quiet listing of mine is talking to someone about "rent to own". Prospective buyer is saying that 3 years is a common term for such contracts. Buyer appears to have good credit and rental history, but is unable to buy now because of custody issues and court costs.

I think that the term is too long...and that I would ask the experts to get your opinions- and does anyone have any idea on how often statistically rent to owns actually purchase the property?
Thanks

Why would this "Prospective" Buyer have knowledge about what's Common or Uncommon? How many times have they entered into such Agreements in the past? And why did they falter ? ? ? ?

Maybe this prior discussion will be helpful:

Rent to Own/Lease Option Contracts


I doubt that there are any statistics on those deals that fail . . . . and darn few on those that succeed. How would people collect that data? (and why?)

Desperate Sellers are often lured into such Agreements. Be sure to get a good (HEFTY) up-front and NON-REFUNDABLE Deposit, as it is often the last money you or the Seller will ever see. And look out for your Commission so they don't get amnesia and forget about you (when and IF it were ever to consummate in a Sale)! That's good practice in staying in touch with your Customers and Clients anyway . . . . here it's an absolute necessity!

These are always fun. Like any Marriage (or Mortgage), they all seem to be made in Heaven; but the Parties will never like one another as much as they do at the beginning . . . . and it's always (almost) Down Hill from there.

I realize that I'm being an Optimist! After Three (3) Years, they should really know one another pretty well. Good Luck!

rclewell

I can only state what the success rate has been for the ones I've done and many that I have followed. In general 3 out of 4 do not exercise the option.

That number changes along with market conditions and available financing when it's time to exercise the option. With the current credit crunch I would expect that number to be 4 out of 5 or worse.

I am going to concur with Bay Area Brian... the vast majority of people never exercise their option to purchase. It usually sounds like a better deal at the time and people don't take advantage of what could be a great opportunity for them.
Make sure that you are collecting a premium on the rent and that money that is to be set aside for the down payment is not refundable. Otherwise, there is no real advantage to you agreeing to the Option.

I'm late to the party, but personal opinion, only the renter/buyer benefits, unless there really are additional funds over and beyond the fair market rent (which is rare). The buyer can walk at almost any point, including if values head south, they can trash the house, and the seller is still a landlord and must comply with rental regulations. It's very lopsided in favor of the buyer.

And 3 years? Never in over 25 years have I seen a 3 year rent w/ option to buy......my percentage of seeing successful rent to own contracts is even lower than Bay Area Brian's.

Rent to own has about a 10 percent success rate and fails for many reasons.

I would do a 6 month to 12 month lease to see how the tenant performs with rents,keeping up the property,etc.

You could take on a lease option instead of a lease purchase and non-refundable fee that is credited toward closing if it happens.

Make sure the non-refundable fee covers the cost of new carpet and paint to re-tenant the property quick if the deal goes south.

If the renter is not willing to do this you are risking to much. The last thing you want to do is incur 6,000 worth of tenant damage for a few months rent. Also if you the landlord are locked into a renter/buyer favored lease it will be really hard to sell your property as the new owner will be stuck assuming your bad lease terms.

Ok, very good responses and because of such I will not offer it to the owner. Thank you all.

Have you had any "Tenant/Buyers" who ever brought a scheme like this up?

When they do, I ask them to flesh out the proposal in terms that will make it enticing to the Seller.

That usually ends the discussion, because they have nothing to offer when pressed to look at it from the other "point of view".

As a practical matter, these deals can only be assembled in situations where the Seller owns the property "outright" . . . . and does not occupy it. Most of our current Mortgages contain a clause which prohibits turning control of the collateral over to a Tenant.

That being said, I did have one successful deal where the Bank still held a Mortgage (with such a Clause), and the Tenants were not squeaky clean*; but the Bank allowed us to do a Land Contract, or Contract for Deed. The Deed was prepared and retained in the Bank's Vault until the Contract was fulfilled. The Tenant Buyers paid the Taxes and Utilities and Insurance, and paid the Seller via the Bank. It would make any Tenant's eyes glaze over, but it was clear as day as we put it together.

* Not squeaky clean in this instance was that while they had good income, the man buyer had a fresh bankruptcy on his record and the woman buyer was not yet fully disentangled from a marriage to a different man (who might have a claim against any new property she might acquire)

Does anybody know how to find lease with option properties? Our MLS doesn't have that as an option.
I have buyers who have good credit, money for a down payment, but because of a bankruptcy and foreclosure, they cannot qualify for a loan until 6/11. They currently rent a house they don't like and the landlord is having financial difficulties and not interested in extending their lease another year, he wants to sell.
Buyers don't want to move into an apt. for a year and then move again when they can qualify, so they are looking for a lease with option.
Any suggestions?

Among our own Listings, we always know who owns their property outright, does not need to occupy it, and is desperate enough to consider something like this.

Different MLSs make the search a little more difficult to sort through those properties listed by others.

Sometimes under financing, the use of "other" is an indicator. I think everyone develops a sensitivity to the use of certain code words.

Sometimes a "key word search" in the remarks will produce results for you . . . . like search for the word "rent", or "option", or Owner will participate in financing, or Owner will hold 1st (Owner will hold 2nd doesn't help!).

Many Listing Agents will not broadcast the possibility of such an opportunity because it saddles them with "the lowest common denominator" and offering the same terms to everyone, or explaining why "they" are not good candidates . . . . always a Pandora's Box. But they still need to be selective in protecting their Sellers' interests.

I don't know all MLSs; but we have had the mis-fortune of having to become acquainted with Altaira; FINIS, Ambiance, REMIS, Passport, Paragon, and Innovia. They all seem to offer some work-around to convey this kind of information to those who are patient and become sensitive to looking for it.

Thanks, I'll give it a try!

You might want to check out new construction. In my area builders have been going this direction just to get someone to pay the mortgage. I have also seen builders do owner finance as a last resort.

I have also called listing agents on individual properties and asked them if their seller would consider renting/option to purchase. I have done this and was able to get a client into a rental this way.

Good Luck!