Is Rent-To-Own Ever Worth It?
Rent-to-own agreements have a bad reputation in the real estate industry, but is it deserved? Well, it depends. There are many different kinds of rent-to-own agreements, and each one can be modified and customized for the tenant and the landlord. Many rent-to-own agreements overwhelmingly favor the would-be seller of the property, the landlord, which is one reason why they have the reputation they do. What do you need to know about rent-to-own agreements — and could it be worth it for you? The rent-to-own basics In a nutshell, the way rent-to-own works is that tenants agree to pay additional money in rent every month in exchange for the opportunity to buy the house. There are a couple of different ways these agreements can be structured, but they always boil down to above-market-level rent so that the tenant can start building some equity in the home. This can be problematic simply on its surface. For tenants who struggle to save up enough money for a down payment, it might not be at all easy to spend several hundred dollars every month on top of their rent value. On the other hand, tenants who can’t manage to save a down payment might find that this is actually a better option — the money is going somewhere they can’t touch it, and when the time comes to buy the house, it’ll already be there waiting for them. Lease option and lease purchase agreements There are two essential types of rent-to-own agreements, a lease option agreement, and a lease-purchase agreement. Of the two, the lease-purchase agreement is more legally binding: If you sign one of these, you are obligated to buy the house when your tenancy is over. In a lease option agreement, however, you have the option to buy the home when your lease is up — but you are not required to. These agreements will also include details about the home purchase. Sometimes a lease option or lease-purchase agreement will go so far as to state the sales price of the home when the tenant’s lease is up, either based on the home’s current market value or calculated as a projected value. But other agreements specify that the home purchase price will depend on the real estate market when the tenant is actually ready to buy. In both of these lease agreements, the tenant is responsible for securing financing for the home purchase once the lease is up and the tenant is ready to buy. This means that if you sign a rent-to-own agreement and you aren’t able to get a mortgage loan when your lease is up, you may forfeit all of the extra money you paid throughout your tenancy. The cons for buyers There are a few big red flags that buyers should look for in any rent-to-own contract. And if you’re seriously considering buying a home like this, do lots of research on the seller. You don’t want to find yourself at the mercy of a shady person with unethical business practices because you were too excited to own a house to do any due diligence. Buyers will have to pay an additional upfront fee for the opportunity to buy the house at a later date. Often called option money, this money might or might not apply to the equity in your home, and will almost definitely be lost if something happens and the deal falls through. One thing that buyers need to think about is maintenance clauses. In many rent-to-own agreements, buyers are responsible for maintenance and repairs on the home during their tenancy. This might not be a big deal if you have to get a window air conditioning unit fixed, but what if there’s something wrong with your water heater or your sewer main? Or your fuse box? Those repairs can really add up, and you’re still not the owner, so you’re spending your own money to repair a house that you might not ever own. Another clause to keep an eye on is the one that outlines under what conditions the agreement can be broken. Often, if the buyer is late with a single rent payment, they lose all of their investment. And if the landlord isn’t in good financial standing and forecloses on the house, the buyer loses all their money invested then, too. This is why it’s important to research your landlord-seller. If they have a history of taking advantage of buyers, then you can probably find evidence of it. Ask them for references, and do your best to figure out what kind of person you’re doing business with. Lots of people who offer rent-to-own opportunities are ethical humans, but of course, there are always bad apples. And, of course, if something happens with your job or your family, and you have to move out of the area, you’ll have to break the agreement and leave your home (and investment) behind. The pros for buyers Many clauses in a rent-to-own agreement are negotiable, which means you can ask for things, too! You can request that your option money go toward your equity in the home, for example, or for the seller to maintain the big systems in the house while you’re in charge of smaller wear-and-tear items. So one pro is that if you know your rights and you're willing to work with your landlord-seller, you can come up with an agreement that works well for both of you. Another is that for buyers who want to own a home but aren’t quite financially ready, rent-to-own can really help you build equity and set yourself up to buy the house where you’re living in a couple of years. A rent-to-own agreement isn’t for everyone. It can be more expensive than buying a home the traditional way over the long term, and if buyers have the ability to save up a down payment and jump through all the hoops, they will most likely get a better deal on a house that isn’t a rent-to-own. But if you’re in love with the house where you live and it’s worth it to get your foot on the homeownership ladder that much sooner, it might be something you should consider.
Smart Buyer’s Guide to Choosing the Perfect Property
Daydreaming about owning your own home is one of the most intoxicating practices known to modern man, especially now that HGTV and all the house flipping shows make it look like a cake walk. But when the time comes to actually put your money where your daydream is, it can be challenging for first-time buyers especially to understand how a home that doesn’t currently come anywhere close to “dream” status could be whipped into shape -- and how a home that they think is perfect now will end up feeling like a mistake in a couple of years. To avoid that unfortunate scenario, first-time buyers will need to think carefully and weigh all of their options. After considering all of these factors, you’ll be well-prepared to choose a house that feels like home today and for years to come. Price First and foremost, you need a home that you can afford. There’s no sense in deciding that you must have four bedrooms when the most you could afford in your market is two. You don’t need to go through the entire process of getting pre-approved for a mortgage before you can start even considering what you want, but do a little bit of research around what your current housing market looks like, and then think about the down payment size and your own current finances. There are mortgage calculators and other tools online that can be useful, and it’s almost always helpful to talk to a real estate professional, like a mortgage broker or a real estate agent, so you can get a realistic idea of what you might need to spend and what you can spend on your new home. Beds, baths, and size You know what size your household is and whether it’s likely to grow in the future. You also know how much space you’re likely to need based on your own current household’s configuration -- if you work from home, then your desire for a little more space (and a room for a home office) might be non-negotiable, whereas if you’re used to commuting to an office every day, you may not need a home office at all. So get a handle on the minimum number of bedrooms and bathrooms you’ll need in any home you buy. If you can, try to come up with some parameters for square footage, too. And you may want to think about your overall lot size if, for example, you’re an avid gardener or you have large dogs who’ll need some space to romp in the yard. Special features Once you understand your basic requirements for a home, you can start thinking about additional features that you’d like it to have. Perhaps you want a garage to store your tools, or a fenced in yard for the aforementioned dogs -- or a deck where you can lay out and soak up some sun on weekends. You should also think about the ideal heating and cooling setup in any home you buy, and it’s also wise to consider the school district (because even if you don’t have kids, it’s smart to keep in mind any buyers who could purchase your home from you in the future -- they might have kids). Some of these special features might be “nice-to-haves,” and you might decide that some are absolute necessities. Spend some time talking to a general contractor or a real estate agent before you make any final decisions about necessities, though -- it’s quite possible that some of the things on your “must-have” list can be easily added once you move in. Location matters -- a lot Smart first-time buyers will want to think beyond a school district when choosing a home. How close is your home to major highways in the area (and is that a good thing or a bad thing)? How close are you to work, and are there other job opportunities or thriving industries nearby? What’s the shopping like? Are there parks or recreation centers, and where are the best grocery stores? You’re buying a neighborhood just as much as you’re buying a home, and unlike your home, there isn’t usually a lot you can do to change the neighborhood. So make sure you’re fully aware of what the area where you’re hoping to buy is like, both positive and negative, and understand how that’s going to affect your life while you’re in the home and any buyers who may come after you. Focus on what you can’t change It’s really easy to fall in love with one part of a home and allow it to cloud a truer vision of your future. Maybe that kitchen is perfect for re-imagining yourself in a scene from Julia and Julia, but if there aren’t enough bedrooms or bathrooms in the home, then you’ll regret the purchase soon after you move in.Try to look beyond trims and finishes to focus on the aspects of the home that are fixed and unchanging, like the lot size or the location of the property. If you’re touring a potential home with an agent, give your agent your list of must-haves and ask your agent if the house could fit that list with a little bit of work. A real estate professional can help you figure out if a house that you think is just OK today might actually be your dream home in disguise. You can change out carpeting for hardwood floors and redo a kitchen over time, but if your heart is set on waterfront property … that might take a few thousand years to manifest, and you don’t have that long. Is that really a “bargain”? If you’re faced with a choice between a home that seems like a bargain but requires some fixing-up and a home that’s more expensive but requires little or no work, which should you choose? In general, you probably want to opt for paying more out-of-pocket today for a home that’s still standing solidly tomorrow. There might be a good reason why that home is listed at a “bargain” price -- it might be too expensive and time-consuming for anyone to reasonably fix. This is another area where your real estate agent can help you understand whether a home’s condition is really worth the savings. Agents have seen homes in the area of all ages and in many different conditions, and they can let you know what issues typically arise in homes and whether the place you’re considering might be at risk for exhibiting one or more of those issues.When you know how to choose the perfect property, you’re in a good place to start your home search -- even if you’ve never bought a home before. Once you’ve got your short list of what you’re seeking, talk to a real estate professional so you can take the next step toward your homeownership dream.
5 Home Seller Strategies for Staging Your Home Perfectly
There’s a reason why people love looking at photos of homes for sale — it’s rare that we get to see a place look it's very best, and scrolling through gorgeous room after room helps serious buyers see themselves settling down in those very rooms.But as any seller (or photographer) can attest, getting a home ready for its close-up (also known as “staging”) is not easy and is definitely not always fun. It involves a ton of cleaning, some furniture removal (or placement), a plethora of attention to detail, and usually a lot of light. This is why professional stagers charge hundreds (sometimes thousands) of dollars for their services. If hiring a stager isn’t in your budget or you’re simply more of a do-it-yourself type, consider taking advantage of these relatively quick and easy methods for helping your soon-to-be-sold home appear shiny and new. 1. Clean, clean, clean, clean, clean Even if you follow every other tip on the list to an exacting standard, if your home isn’t clean, you won’t be reaping all of the benefits that staging could generate for you. There are two big steps to cleaning for staging: Decluttering your home Deep cleaning everything … everything First is the clutter. This might be a good time to join the neighborhood garage sale or arrange for your sister-in-law whose kids are a few years younger to come pick up all the hand-me-downs you’ve been promising. It always makes sense to start with things that you don’t want to pack up and move to a new location.Don’t forget about the furniture — too much furniture in a room makes it look cramped and small, so remove what you don’t need.Resist the temptation to box everything up and stash it in one room, the garage, a basement or attic — unless it’s not your room. Buyers are going to want to open doors, cabinets, and drawers, and peer into closets and utility rooms, so if you want your home to look its best, you need to keep those areas neat, too.Some sellers rent storage facilities during the process, and that’s always a possibility, too. If you have family or good friends in the area who can take some of the larger items for you, then you might be able to get a smaller storage unit. (Make sure to pay your loved ones back with a gift or thoughtful gesture when the home is sold!)When the surfaces are clear and your surroundings are feeling more vacation-home than lived-in, it’s time to deep clean those surfaces. Scrub the inside from ceiling to floors; wash your windows; consider power-washing the outside to brighten it up. Plant new flowers, keep your sidewalks and walkways clear and weed-free and set some inviting chairs with fluffy cushions on your (freshly polished, cobweb-free) front porch. Once the decluttering is done, it’ll be much easier to get everything looking shiny and new — and easier to hire help, too — so make sure to tackle this step first. 2. Light up If you haven’t changed a light bulb in a while, then you might be surprised by how much brighter they’ve gotten — or what a difference a bright bulb can make in a room that you thought was naturally dreary and dim.Changing out your bulbs can be a quick way to give your entire home a quick lift, brightening up every room and helping potential buyers see exactly how well-maintained those original wood floors are, and examine the crown molding close up. Experts suggest that you obtain 100 watts of lighting for every 50 square feet in your home, and consider using three different types of lighting (not just overhead lighting) to get there. Overhead or ambient lighting is important, of course, but accent lighting (on walls and tables) and task lighting (reading or under-cabinet lights) will help showcase your space in all its glory. 3. Rearrange with an eye for balance Most of us don’t live in perfectly symmetrical surroundings, but if there’s a way to achieve it with your furniture, then it’s worth it to try — at least for the photos. Try to balance any shelves, counters, and mantelpieces in the same way, with an eye for highlighting the accessories that will help make your home look like a retreat from a messy world. You can do the same thing with area rugs and artwork. Arrange your floor and wall coverings to draw the eye down the halls and through the house, which will give touring buyers a pleasant sense of welcome and discovery. 4. Organize and energize There are always going to be parts of your house that are made to hold “stuff” — but you can make that stuff look presentable with a little bit of organization. Some decluttering and color-blocking on your bookshelves can make the display draw the eye instead of distracting from the rest of the room, for example. Kids’ and pets’ toys are another opportunity to organize and beautify with a decorative box or basket, or a fun shelving unit that holds everything with style.Straighten your shoes on the closet floors and neaten up the hanging areas, then open up the doors when you leave for a buyer’s tour. They’ll enjoy the welcoming feeling of the open doors (and you know they were going to open them up, anyway). 5. Polish up the appliances If you can afford it, new appliances in the kitchen can go a long (long!) way toward helping a buyer fall in love with the heart of the house. New appliances tend to help generate high returns for sellers, so depending on the condition and upgrades in the rest of your home, you might want to consider it — you might be able to find some good deals on floor models or end-of-season sales, too. If not, help your appliances look their best by using stainless steel polish, glass polish, or whatever else you might need to help regenerate the shine on your stove. You don’t need to take all these tips when staging your home — but don’t ignore them all when you’re selling, either. Taking the time to pay a little bit of attention to staging before a buyer even sees the place can reap big rewards at the closing table.
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