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how does a land contract or rent w/ option to buy work?

Public Comments

1. it can go many ways. A contract can say just about anything, you better read and have an attorney help. Some have the rent go towards purchase price, others just give you first option before it enters the market
2. First you sign a contract to purchase. It will outline the details of payments, tax responsibility, and term. Most likely a deed will be kept by a title company until the contract has been fulfilled. You will be making rent payments (and may have to pay the land taxes) to your property owner for the length of time you agree to. On the maturity date of your contract, the property owner sells you the land, minus the rent you paid (not all your rent payments may be subtracted from the sale price - this will be in the contract you signed.) and you become the lawful owner of the property. This method is often used when you have the financial ability to purchase the house, but bad credit. Once you have made timely paments to the land owner for a year, 5 years, whatever, and you are ready to purchase from the land owner, your credit will be better, allowing you to secure a "normal" home loan to buy the home.
3. A land contract is a contract between two parties for one to buy the property and the other to sell the property to the first. In it, payments are defined, as well as the selling price and any other conditions the parties agree to. It's a very easy way to buy property, but also an insecure method. Depending on in which state the contract is entered into, missing a payment by as few as 72 hours can give the seller the right to give you a 30-day notice to quit. This means that the buyer has to move out of the premises within 30 days when the seller intends to take it back. Rent with an option to buy is simply renting a house, or such, and having the choice before the end of determined period to buy or not to buy the property being rented. Usually, a portion of the rent goes toward maintaining the option and is not refundable if the renter choose not to buy the property. However, it generally goes toward the purchase of the property if the renter decides to buy it. Or some of it will, depending on how the agreement is drawn up. It will make the rental payments higher, but it is also a way of forcing oneself to make a down payment over a period of time if the buyer doesn't have it to put down at very beginning. I hope this helps.