Frequently Asked Questions regarding the lease-to-own option
1. How do you qualify a tenant-buyer for my home?
A potential tenant-buyer fills out an application for the property. We confirm employment, rental history, and pull a credit report with permission from the applicant. Most folks are interested in resolving their financial challenges; we pull credit 99.9% of the time, even though we advertise “no qualifying”. We’re firm believers in knowing who’s on FIRST!
2. How much time is allowed for the tenant-buyer to obtain FHA, Indiana Housing, grant money, or conventional financing?
The most common time allowed is 12-36 months.
3. What if the tenant trashes my house?
As a general rule, tenants who are purchasing a lease-option property will take better care of the home than the average renters. Why? They intend to live in the home forever and treat it as homeowners rather than temporary tenants. They also know that to qualify for a mortgage, they will need a good record of monthly payments.
With that said, there are occurances (rare though they are) that tenants will trash a property. As is one of the benefits of doing a lease-to-own contract, once the tenant takes possession of the property, they become responsible for all repairs (as long as they are not issues that existed prior to taking possession). Therefore, if a tenant trashes the property while they are under the lease, you as the owner have the right to take them to court for the damages if they do not make the repairs. If the tenants get evicted, they are still responsible for the damages they caused while they were under the contract.
4. Are there upfront payments required from the tenant-buyer for a lease-option purchase?
Yes. This is how we at JTF Property Group get paid. The tenant/buyer pays a non-refundable lease-option fee/down payment that will be credited toward the purchase price of the home, unless he/she does not exercise the option to purchase (in which case, it remains non-refundable).
5. Do monthly lease payments apply toward the purchase price of the home?
With all the terms of the lease-option agreement negotiable, this too is one of those items. This may mean a higher rent amount for the tenant-buyer, so the tenant may not want this option. However, some tenant-buyers might want it as a method of forced savings that would apply towards a lender's required down payment.
6. What type of agreements are signed by the tenant-buyer and owner of the property? An Option to Purchase Agreement and Residency Lease Agreement.
7. Why does it make sense for me to sell my home lease-to-own?
We are replying by asking you a couple of questions. Is the home vacant? Has anybody looked at the property to buy within the last 30 days? Have you given up hope that it will sell? Do you need to move? Do you have time to market the home yourself? Have you exhausted all marketing opportunities? If your answer is YES to any of the questions it’s probably time to consider selling lease-to-own. It is better to get a tenant-buyer in the home who will make the monthly mortgage payments (with the added benefit of a little cash flow and having a buyer lined up) than to leave the home vacant with no income.
Still have questions? Feel free to call Christie at 317-847-2278 or e-mail us.