- Real Estate
How to Sell Your House / Home "Rent to Own" Without A Lawyer or Realtor
Tips on a Do It Yourself Sale
A Rent to Own option on a property you can no longer afford is a fast and easy win/ win situation for you and for the person who "buys" your home. If you need to get rid of your home immediately without the long wait of finding an approved buyer and a formal sale and cannot afford the upkeep on your home by turning it into a rental property, selling your home as a "Rent to Own" can be done without the expense of a lawyer and the responsibility of financially maintaining the home will go to the "buyer." This option is an excellent opportunity to avoid foreclosure.
The Potential Buyer
Many displaced families with damaged credit and moderate income in today's uncertain economy would prefer to buy a home rather than rent. Most do not have the option of obtaining a traditional mortgage and are denied financing. To ascertain the buyer's credentials, income, and credit history, it is important that any person interested in your home complete a buyer's application.
After you determine the value or pay off on your home and the monthly rental payment you wish to collect, you are ready to advertise your home and put the process in action.
Advertising Your Home
When listing your home as a rent to buy property, expect to be inundated with calls from interested buyers. If you do not want drop in visitors who wish to inspect the property on the spot, it is highly recommended that you do not put a sign in your front yard. Confidential listings for sales can be placed on:
- Craigslist in the major city closest to you
- Your local newspaper, shopper, and trader magazines
- Facebook friends and For Sale pages in your town
Which ever method you choose to advertise your home, it is imperative to avoid any correspondence that can be misconstrued as discriminatory. Housing discrimination in any form is illegal and fines upon conviction can be $10,000 for the first offense depending on the state in which you live.
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The Most Important Step: The Rental Application
The most important step in selling your home as a Rent to Buy property is utilizing the Rental Application. This crucial tool will assist you in carefully screening prospective applicants who are interested in Renting to Own your home. It is vital that you collect information on all members of the family over the age over 18 if you plan to run credit and background checks on those coming into your home. Make sure to acquire social security numbers and driver's license and tag numbers of each adult living in the home in the event that the renter/ buyer abandons the property and the contract.
If you are not versed in legal forms, there are many web sites that will create a customized rental application for you in accordance with your state laws for as low as $19.99. Ensure your form includes the potential renters full name, phone numbers of previous landlords, and contact information for his or her employer, and references.
If the potential renter leaves important questions blank, call them and ask them if they are interested in finishing their application. Do not accept verbal information that belongs on the rental application from a potential renter over the phone or in person. By signing the contents of the rental application, the potential tenant signs a disclaimer of truthfulness and gives the landlord written permission to obtain information from a reference. If a number for a reference, landlord, or employer is not on the rental application, do not make the call based on information given to you verbally.
Purchase A Credit History and Background Check:
The Rent to Own Contract
Rent to Own Contracts can be customized for your state and purchased online for a minimal fee. It is important to read and understand any form you may purchase. A rent to own contract can include any terms you wish to include as the seller.
Before choosing and finalizing a rent to own contract, check with your insurance agent to see if you have to upgrade your insurance policy for additional coverage on your “renters.” Make sure to include the stipulations of your insurance company on your rental contract. For example, if your home insurance policy forbids trampolines or pools on the property, you will want to include that in your lease as a stipulation.
Consider having a home inspection done before a renter moves into your home. This will allow you know of any pre-existing conditions in your home that you may not be aware of. This will give you as the seller the option to fix the issues or selling the home "as is." This will prevent your from having to pay for the costs at the closing of the sale.
If you are still making payments on the home, you will need to accurately calculate the remaining balance and interest on the home and determine what to request in rent payments. It is best to use an amortization calculator to make sure the payments you collect will satisfy the amount of the remaining loan before closing.
When creating the contract, you can specify any terms you wish whether it be a requirement for a down payment, a payment schedule, and the terms of sale once the contract is fulfilled. Most contracts specify the amount of people that can live in the home, notates who is responsible for maintenance and repairs, and sets rules for changes to be made to the property. Buyers prefer a longer period to make smaller payments. If you are including an option to buy the property outright at anytime, many renters will need at least seven years to repair their credit to qualify for a loan.
It is important that you request a security deposit for damages in the event the renter/ buyer does not complete the sale or you have to evict them for non-payment. In my personal experience, I have collected a security deposit and in the event that they buyer does complete the sale, the security deposit will be returned to the renter/ buyer at closing to cover a portion of the closing costs.
Once you have found an interested buyer and completed a satisfactory credit and background check on all household members, you can then extend to them the option of signing a Rent to Own Contract. At this time, you collect the first months rent, and the down payment (or security deposit) if you choose these options. Do not allow any one to move in until these payments are made in full. Bargaining with renters gives them the impression that you are flexible and they will assume all lease requirements and payment dates are merely guidelines.
Closing on a Rent to Own Contract
When the contract is fulfilled, it is time to initiate the closing process. The seller must have a clear title to the property and the mortgage must be made in full. Both parties can go before a Title Management company to transfer the title. At this point, an inspection must be done. Careful planning in the early steps will ensure this process goes smoothly for the seller. Damages done by the renter/ buyer while living in the home will be covered in the lease and if so deemed in the lease, it will be his or her responsibility to repair. Fees can be split or negotiated.
A Rent to Own Tutorial
Important Tips for New Sellers
- Anyone wishing to sell home with a Rent to Own Contract but doesn't feel comfortable doing the sale without legal guidance, a lawyer or paralegal to review all self prepared documents before a sale for a small fee.
- Until the property is sold under this contract, the seller is responsible for making tax payments on the property.
- If the home is being sold furnished or partially furnished, make sure to add all items to the rental contract and list their current conditions. Do not forget to add fixtures such as ceiling fans, air conditioning units, furnaces, plantation blinds, and even landscape materials.
- Research Landlord laws thoroughly in your state. Tenants have the Right to Quiet Enjoyment of any rental property. A seller must respect this right as a seller as the seller functions basically as a Landlord.
- Make sure your contract includes a "right to enter" for inspection clause with in. If you rent property to any tenant, this must be in the contract or you cannot reenter the property for any reason. Also, most states require that you give any tenant 24 hours of notice in WRITING before you enter the property.
- The most important thing you do as a Seller is to have and keep good evidence of the property's condition before you rent it out to a renter or buyer. It is highly recommended that you take a walking video tour of the entire property and its condition and keep it for your records. It is also recommended that you take photographs of every room in the home to showcase its condition. When creating a rent to own contract. I always include the photos as part of the contract. Having an inspection done prior to renting the home will legally prove the home's condition and ensure the rights of the seller if damages occur.
- If you are selling property that you consider to be a home, you must emotionally prepare for strangers to be living in it. It can be difficult to experience but if you proceed with the sale, you will have to let go of your attachment and expectations.
Why Rent to Options Work
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