Q: What are the benefits to the Rent-To-Sell/Rent-To-Own model?
Answer: With our Rent-To-Sell Program, you should net 20% to 30% more than if you listed and sold through a Realtor on the Multiple Listing Service (MLS).
Also, you the seller have a family living and caring for your property to a much higher standard than that of a typical renter. You open the marked to a whole new segment of potential buyers who have good jobs, significant savings but just need time to repair their credit and secure financing on a property that they would otherwise have missed out on.
Q: What percentage of your tenant/buyers actually end up purchasing the property?
Answer: based on our placement model, current stats are: 80% of candidates go on to purchase.
Q: Is the option fee/down payment just applied to the purchase price?
Answer: Yes, the option fee/down payment is considered a down payment on your home, and is applied to the purchase price (payment is not used towards their closing costs). Therefore, we try to put this fee on top of what you want to net at closing when they go to purchase.
Q: How is the down payment transferred to the buyer at closing?
Answer: The tenant-buyer who is interested in your property is required to put their option fee/down payment into our title attorney’s escrow account. Once you and us have agreed to move forward with them, then the money is released from the attorney’s escrow account. The full first month’s rent goes to you, and the option fee of 3 to 6% of the purchase price of the home goes to our company. If the tenant-buyer happens to put down more than 6%, then all of those monies go directly to you.
Q: If the option fee the tenant/buyer pays goes towards your compensation, how is the seller protected in case the buyer vacates the property and/or causes damage?
Answer: The contracts make the tenant-buyer fully responsible for all repairs and maintenance, and their option fee/down payment is not refundable. Also, we have never had a tenant-buyer who puts down between 3% and 7% of the purchase price do anything to jeopardize those monies. A tenant-buyer is truly a different caliber of person than a typical renter.
Experience has show that with our business model, anytime a tenant-buyer does not purchase, they leave the house in excellent condition, and many will do improvements to the home, leaving the seller with an improved property. We do a thorough back ground, employment and rental history check. Plus, 99% of tenant-buyers get into credit repair and keep us/you informed of their lendablility and progress towards getting a loan.
This is not to say that there is no risk, in perspective, our affiliate program in Baltimore, with six years experience and over 200 properties, have never had a tenant-buyer do any damage to a property. Additionally, it is tough for them to come up with the option fee/down payment, full first month’s rent, AND a security deposit. To handle the tenant-buyer being responsible for repairs and maintenance, the seller typically pays for a home warranty, and the tenant-buyer pays the deductible when the home warranty company sends out a contractor to do the repairs. We can send you information on what is usually covered under the home warranty. A home warranty is the most economical way for the tenant-buyer to be responsible for repairs and maintenance, and it encourages them to call and fix things, as the deductible is only about $50-60 when the contractor comes out.
The tenant/buyer really wants to own the home and the option fee/down payment is a LOT of incentive to take excellent care of your home and to purchase it. There are some companies out there that do lease-options and don’t conduct a thorough investigation and/or don’t get a sizable option fee/down payment. This slack in choosing a tenant/buyer will lead to someone who is more like a typical renter, and is not the caliber of person that we are looking to put into your home.
Q: Why should I offer a rent credit?
Answer: Offering a rent credit gives the tenant/buyer a powerful incentive to pay their rent ON TIME EVERY MONTH. A rent credit only accrues in a month where the tenant/buyer pays the rent on or before the due date. The rent credits are applied as seller concesions/closing costs. The amount varies based on the seller, however we suggest a minimum of $100/month.
Q: What happens if the property does not appraise in 18 months at the price we set?
Answer: If it does not appraise, you have two options:
- Lower the tenant-buyers’ purchase price to the appraised value; or
- Extend the tenant-buyers’ terms until the home does appraise at the price you want.
Q: How do we decide on a monthly lease payment?
Answer: We usually go with either the market rent or mortgage payment, whichever is higher.