Q: As sellers, what do we need to know to protect ourselves in considering a “delayed sale” or “rent-to-own option”?
These are being presented as a way to do better than the “low” offers that have been received verbally by our agentAn Agent is an individual who acts on behalf of a consumer. A real estate agent represents a buyer or a seller in the purchase or sale of a home. Licensed by the state, a real estate agent must work for a broker or a brokerage firm. An insurance agent helps a consumer purchase an insurance policy. Insurance agents are also licensed by the state.. Who can I ask in my community that would be knowledgeable and neutral at the same time? Thanks!
A: By “delayed sale,” I assume you mean selling the property in stages to a buyer. This is more commonly known as an “installment sale.”
An installment sale (also known as an articles of agreement) is a form of seller financing where you sell your home to a buyer a little bit at a time. The buyer receives an interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds. in the house, but you hold titleTitle refers to the ownershipOwnership is the absolute right to use, enjoy, and dispose of property. You own it! of a particular piece of property. until the buyer has paid off the loanA Loan is an amount of money that is lent to a borrower, who agrees to repay it plus interest. in full.
If you sell your home in an installment sale, you must have paid off all or most of your mortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home..
To minimize your risk, you may want to rewire the buyer to put down a significant amount of money. If you still have a significant loan on your property, selling it in pieces might force your lenderA Lender is a person, company, corporation, or entity that lends money for the purchase of real estate. to call your loan or foreclosureForeclosure is the legal action taken to extinguish a home owner's right and interest in a property, so that the property can be sold in a foreclosure sale to satisfy a debt. on your property.
“Rent-to-own” is the same as lease with an option to buyA Lease with an Option to Buy is when the renter or lesseeA Lessee is you, or the person leasing a vehicle or residence. of a piece of property has the right to purchase the property for a specific period of time at a specific price. Usually, a lease with an option to buy allows a first-time buyer to accumulate a down payment by applying a portion of the monthly rent toward the down payment.. Essentially, the buyer pays you a fee (which you keep) for a 1-year option to purchaseAn Option to Purchase, also known as a Lease/Option, is when a buyer pays for the right or option to purchase property for a given length of time, without having the obligation to actually purchase the property. the property. The future buyer will then rent the property from you.
Often, with a lease/option agreement, you’ll credit a portion of the monthly rent and perhaps even the option fee toward a future down payment on the property. After a year, your renter will decide whether he wants to pick up the option and purchase the property at an already agreed-upon price, renew his option and continue to rent, or move on.
You should talk to a qualified real estateReal Estate is land and anything permanently attached to it, such as buildings and improvements. attorneyA Real Estate Attorney is an attorney who specializes in the purchase and sale of real estate. who can walk you through various options and the risks and potential rewards that they carry.