RentToOwn-HouseFinder.com
I want to sell my house as CFD (contract for deed) or do a rent-to-own. How does that work?
Anyone ever done this? I have no idea how to get the legal paperwork started... or even what terms to offer someone.
Public Comments
- Those forms are available at office supply stores or you can google them. The online versions are usually copyrighted and it's illegal to use them. realtor.sailor
- Well, if I were you I'd get an attorney involved, he or she'd have to drawn up the contract to record. Here is the way it works, basically. This is just a senerio so you get the idea. Purchase price: $30,000.00 Downpayment due the day of closing $5,000.00 YOU, the Seller, would carry the buyer for $25,000.00 on a 10 year term at 5% interest with a balloon payment due in 3 years. SO the buyer would give you $5,000.00 the day of closing out of that you would pay your transfer expenses, in Iowa it would be commission (if Realtor involved) revenue stamps, pro rate property taxes, contract and deed fee, and abstracting. Not sure about other states, Iowa is the only state to do abstracting. Make sure you get a down payment, the problem with a contract is that if the buyer trashes your house and walks away you get stuck with it, so get a good downpayment. It's a lot harder to walk away from $5,000 then $2,500. Of course the down payment is yours to keep wether the buyer fulfills the contract of not. The buyer would make monthly payments to you for 3 years, then they are expected to have enough equity in the house they should be able to get a loan from the bank. As far as rent to own, I don't know about that. IF you mean rent with the option to buy then the buyer gives you a certain amount of money to "buy" that option and wether it be a yr or 2 yrs, the buyer can decide NOT to use the option and not buy your home, you however don't get the opprotunity to change your mind, if you agree to it the buyer is the only one that can legally default the option, the seller can't. If they buyer defaults you get to keep the money they buyer paid for the option. If I was going to do this and I wasn't a Realtor, I'd make an appt with a Realtor and see what terms they use in your market. Every area is different, a Realtor would have a good idea of what terms would be best for you.
- Despite the first piece of advice, do NOT use any forms you can buy in office supply places. Second: You may be putting the cart before the horse. You say you want to sell using contract for deed or rent-to-own, but you aren't sure how it works or what terms to offer. That's not a criticism, but what you need to do is figure out what your objective is. Then find a technique that suits that objective. Maybe contract for deed is the right technique, maybe not. Assuming you find that a rent-to-own is the best way to achieve whatever your objective is, then see a lawyer. Again, the office supply forms are no good. They won't adequately protect you. They won't tell you whether to use separate documents for the lease and the option (you should use two forms); they won't tell you that a lease-option may violate your Due on Sale clause or how to minimize that risk. They won't tell you how to structure the deal so that you can get rid of a non-paying tenant-buyer through eviction, rather than a foreclosure. They won't tell you how to put most of the burden for repairs and maintenance on the tenant. They won't tell you how to structure the money from the tenant-buyer so that you receive the maximum option fee, and yet are able to designate some as a security deposit to show that there's a lease in place. Shall I continue? Naahhh. You are probably getting the basic idea. The concept of a rent-to-own is simple. There are two parts: A lease, which is pretty much your typical lease. And an option, which gives the tenant-buyer the right to purchase your property within a specified time frame for a certain price. Often, the tenant-buyer provides a non-refundable option fee at inception. He/she pays slightly above market rent, with a portion of the payment being credited toward the purchase price. During the option period, the tenant-buyer has the right to purchase the property at the agreed-upon price. If the tenant-buyer doesn't buy, he/she forefeits the option fee, but has no further obligation. And you should know that the success rates of rent-to-owns ranges from about 30% to maybe 65%. It's definitely not a sure thing. So: First determine what your objective is. Then find a technique that will achieve that objective. Then use a lawyer. Hope that helps.
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