How Does Rent to Own Work?
Rent to own houses in Grand Rapids, otherwise known as lease options, can be a great choice for both buyers and sellers in the right situation. Let’s cover some essentials on the rent to own process as it works in Michigan.
The Basics
In a rent to own house in Grand Rapids, the owner will rent their home to a tenant-buyer. The tenant-buyer makes monthly rent payments in exchange for the right to live in the home. In addition, they have the right to purchase the home during the length of the contract.
Why would a seller offer their home as a rent to own?
This type of sale offers many benefits for the seller. First, it can be faster to find a buyer if you are selling as a rent to own house in Grand Rapids. The traditional sale process often takes a long time, and by offering your home as a rent-to-own, you expand your potential buying pool. So if you need to sell your home quickly (or don’t want to make two mortgage payments), this can be a great choice.
Secondly, if you don’t have much equity in your house, this can be a good way to sell your home without bringing money to the table. Because these transactions often don’t involve Realtors, you can save on commission, and you often get higher offers with a rent to own house.
Third, if you are a landlord, and want to continue receiving monthly income from a property with fewer headaches, this can be a good choice.
Tenant-buyers typically take excellent care of the property, because they are actively working to buy the home. If you choose to work with a company that guarantees payments and takes care of maintenance and repairs, like we do at Honeybee Homes, you can reduce your stress even further.
Why would a buyer choose a rent to own home?
Often, a buyer will fall in love with a home. However, if they lack the funds for the down payment on a loan, that home could slip away. A lease option is a great way for them to get into their dream home while saving up the capital necessary to get their mortgage.
Additionally, some buyers may need time to repair their credit. Sometimes, even if a buyer has a solid income, savings, and payment history, they may have past issues that are preventing them from getting a mortgage. A rent to own gives them a bit more time to rebuild their credit while they live where they want.
Some buyers aren’t certain they will want to live in a house or neighborhood long-term. This type of transaction allows them to live in a very nice house, with an option to purchase, while they finalize their plans.
Potential Challenges
Rent to own houses in Grand Rapids are often bought and sold directly from seller to buyer. Therefore, it is very important to have a clear agreement and correct contracts from the start. By laying out the arrangement in black-and-white terms, you can avoid a lot of stress down the road.
Remember that in this situation, the tenant-buyer is technically renting the property. Therefore, all Michigan tenant-landlord laws apply, such as lead paint disclosures and late fee regulations. Again, while tenant-buyers typically take excellent care of the property (and handle all maintenance and repairs), it is good to be aware of these laws.
It is possible that the tenant-buyer will not ultimately exercise their option to buy. While both parties hope that the lease option will end with a successful closing, it does not work out 100% of the time. Knowing this from the start can help your peace of mind if the tenant-buyer ends up not closing on the home.
Finally, remember that a lease option transaction is an ongoing relationship. You and the other parties will be working together for at least a few months, while payments are made and you work towards closing. Before you sign any paperwork, make sure that you are getting into business with the right people. A good professional relationship will help all of your interactions run smoothly.
As always, feel free to contact us at Honeybee Homes at (616) 606-3390 for additional help regarding your home.