How to Sell a House Through a Lease Option
Most of the content written about here on US Lease Option is in regards to buyers but this one is for sellers. With the government shut down and mortgage rates going up and down like the stock market it may be about time for sellers to get creative with selling their home. Lease option also known as rent to own is a method in which you find credible buyers who can’t currently qualify for a loan, don’t have enough money for a down payment, or need to work on fixing their credit and allow them to rent for a pre-determined period of time with an option to buy at the end of it. Below well go over all the steps needed to sell your house via lease option.
Step 1: Determine if Selling Through Rent to Own is Right For You
Selling by rent to own is not for everyone or every situation, carefully weigh your options before entering into a contract. If you need immediate cash from the home sale or are not interested in being a short term landlord you can throw the idea of selling this way out the window. Also, be prepared to possibly go through several signed contracts before getting a buyer who actually executes the option to buy.
Step 2: Attract Buyers and Pre-Qualify
Attracting buyers is not a complicated process but if you want to be able to sell the home at the end of the lease you will want to pre-qualify them. Popular methods for attracting buyers include signs in the front yard if you live in a popular area, creating ads online, or placing an ad in the paper. Once you have a gathered a pool of potential buyers you will want to treat them like any normal tenant with background/credit checks and income verification. A less than perfect credit score is to be expected but you will probably want to stay away from criminals and jobless Joe’s. It’s important to consider tenants as potential buyers, otherwise you end up screwing people over.
Step 2: Work With a Real Estate Agent to Negotiate A Contract
Unless you’ve used this method quite a few times you will want to work with a real estate agent or real estate attorney to draft all the terms of the contract. This covers everything from the length of the lease, extensions, rent credits, and your responsibilities until the home is sold. Having all of these items ironed out is crucial for this process to run smoothly for you and the buyer. Be sure to also change the type of insurance you have on the home once they begin renting just in case something happens, but this can and should be pre-determined in the agreement.
Step 3: Collect Payments and Rent Credit for the Term of The Lease
This is the easiest part of the process, during these 12 to 36 plus months you’ll simply be a landlord. Make sure they pay on time, check on the property to make sure they aren’t destroying it, and continue paying your mortgage on the property.
Step 4: Have the Buyers Execute the Option to Buy
After the above steps it’s time to finish the deal. Barring something during the lease going awry, an agreed extension of the lease, the buyer walking away or the buyer not qualifying for a loan it should be straight forward. However, if the buyer walks away by choice or by agreement violation then you will keep their good faith down payment and rent credits. Overall, if executed correctly the rent to own process should be a win-win for both buyer and seller.
For more rent to own resources for both buyers and sellers visit our resource center which full of advice and more information.