Boy have times have changed.
Up until a few years ago the only leases we drafted were on our own rental properties. That was until the banks came into town and ran the real estate market into the ground. Now many homeowners are being forced to rent their homes or foreclose, if they want or need to move on. The local MLS we belong to - MiRealSource shows the following data for 2008 in Macomb County - 896 homes and 458 condos were rented out by real estate agents vs 12 homes and 10 condos in 1995. Pretty amazing for a town that is not what you would call a vacation hot spot.
So what does all this mean?
It means that homeowners today are becoming landlords, only not for money. Fact is many are actually paying for someone to live in their home, till the market turns around. Especially, once you factor in the increase in property taxes once the home goes from owner occupied to non-owner occupied. As you can see from this millage rate chart, property taxes jump quite a bit. To make matters worse homeowners are finding that a huge percentage of the tenants have less than perfect credit and many are either in foreclosure or headed for one - making the homeowners very uneasy.
However, there may be something that could help since the homeowners still want to sell and many of the tenants really want to own. But...
Is Rent to Own Right for You?
Let's take a closer look:
- First - the tenant/buyer and the landlord/seller have to draft a purchase agreement and determine a price. But what price? Today's price? What if the market falls more? What if the market turns around?
- Next - the tenant/buyer has to come up with a non-refundable deposit - but how much? If they walk will they lose it?
- What amount will the rent be and what amount will go towards the purchase? $100, $300? Lenders say anything over "Fair Market Rent" can be used.
- When should the option end and a closing occur? 1 year, 3 years?
- What if the tenant/buyer can not get approved for the mortgage? Should the seller extend the contract or evict?
- What if the home does not appraise? Will the seller come down or the buyer come up?
- Will the buyer be allowed to make major changes to the home?
As you can see it is more complicated then one might think. Everything needs to be spelled out.
Can anything else can be done?
Yes, instead of a Rent to Own there is a clause built right in the lease that states IF the seller decides to sell the tenant will be given first right of refusal.
Give us a call and let us help you determine what Option is best for you!
