How To Sell Your House Using Rent-To-Own

You take the time to fix and repair your property so it is in excellent condition. Your home sits on a great lot in a great location next to schools and parks. You and your Realtor list your house below market to sell fast. Everything is perfect and….......nothing happens.

This may seem like the worst case scenario for most homeowners in the US, but unfortunately it is the reality in today’s real estate market. Many homeowners have found themselves doing whatever it takes to sell their house whether it’s making repairs and upgrades, adding incentives, or giving buyers more house for their money. One approach to selling your house in this market is to increase the amount of buyers that can actually look at your house.

Offering your home as a rent-to-own will not only allow more buyers to qualify for your house, but it will also allow you to increase the asking price instead of taking an extreme discount. Here are some steps on how to sell your house using rent-to-own.

Step #1: What is the rent? Do some research to determine what the going rental rate for a similar home is in your area. Make sure you compare the square footage, number of bedrooms and bathrooms, and the age of the home. Most banks that will refinance a rent-to-own buyer will ask for rental comparables to make sure that you are charging the going rent.

Step #2: Offer rent credits. Once you find out what the average rent is, you are allowed to charge more and offer the tenant buyer a rent credit to give them at closing. This is a great way to help the tenant buyer save up for a down payment that may otherwise be hard for them to have at the time of closing. It will also give the tenant buyers more skin in the game to take care of the property and stick with the program.

Step #3: Determine the sale price. Many sellers will try to over inflate their sale price in order to take advantage of buyers who just want a place they can call their own. What is important to understand is once your tenant buyers exercise their option to buy, your home must appraise at or above the purchase price. If this doesn’t happen, the buyer’s lender will not give them the loan.

Step #4: Set the option fee. When selling a house using rent-to-own, you want to have an option fee that protects not only you, but gives the tenant buyers incentive to stick with the program. This option fee is typically around three to five percent of the purchase price. If the tenant buyer executes their option to buy, they can use this as an additional down payment. If they do not end up buying your home, you keep this as a non-refundable deposit.

Step #5. Find and screen the buyer. You can advertise your home for sale as you normally would, but make it known that you are willing to offer your home as a rent-to-own. Put a sign in your yard that will attract buyers driving by. Once you find some buyers, make sure you screen them as a tenant. You will want to verify their employment, do a credit check, and a background check before you sign any documents with them. You will also want your buyers to go to a local bank and ask the banker their status on obtaining a loan in the future.

In Conclusion, when it may seem impossible to find a buyer for your house, their may be more creative solutions to selling your home in today’s market. When offering rent-to-own, make sure you consult with a lawyer that understands these types of transactions and never assume anything when a buyer says something about their situation. After all, they will be renting out your personal home that you still own. You will have to work with them no matter what happens once they move in.

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