Dear Readers, I wanted to put together a page that discusses alternative financing for the masses. This information is provided based on information gathered from various sources and does not reflect the business practices of the Chris Rocheford team or Keller Williams Realty.
Lease Option Purchases: Lease option purchases are where you the individual are buying the option to occupy the property and the option to purchase the property at a set price in at a future date. This method typically has a $3,000 to $5,000 option purchase price (down payment) and then a separate lease attached to the transaction. The option purchase price is typically non-refundable. Some investors have different flavors of lease options. Such as a portion of the rent being applied towards a down payment on the future purchase price. The catch here is that if you are late on your lease or choose not to exercise the option you are out all moneies put forward.
Contract for Deeds: Contract for Deeds (C4D) are another example of owner financing where the owner requires anywhere from a 10-20% down payment and your making payments to them on a monthly basis (similar to a mortgage) with interest. The catch here is that if your late with your payment your contract is null and void and the owner can pursue eviction. Under the C4D you register your C4D with the county and obtain a right to occupy the property. It is important that if you are buying under a C4D that you have a title search performed to make sure that there are no mortgages on the property currently. If their is a mortgage on the property the C4D could trigger the due on sale clause located in almost all mortgages, which could leave you the buyer high and dry.
Both the Lease option and the contract for deed have Real Estate Purchase agreements filled out prior to moving into the property. The Contract for deed will have an actual closing on the purchase transaction prior to move in whereas a Lease Option does not have a closing until the buyer chooses to exercise thier option to buy.
Rent to Own: Rent to Own (R2O) is just that you have a lease with a security deposit in which you are essentially renting the home. However what makes this different from a standard rental is that a portion your monthly payment is allocated towards the payment of the home. Title does not change hands or is registered until the terms of the R2O contract have been completed.
If you are interested in more information please contact me for a personal and confidential appointment.
The following video shows a recent buyer survey indicating what is important to buyers.