State Specific Question About: UTAH (UT)

on behalf of (and by) Lynda:

OK, here it is:

FIRST--there is no such thing as 'lease purchase documents."(or rent to own) That very phrase mixes apples and oranges. There is always 2 dif documents--the regular lease that regulates the tenant's behavior while residing IN the property, and the Option to Purchase paperwork where the tenant purchases an option to buy the property.

SECOND--doing a Purchase Option is very tricky; the one I have is TX specific. You will have to use one that is proper for MO, BUT I will give you some very imp things to include and NOT include in your option wording. The tenant-buyer first purchases an exclusive option to buy your property. This option gives them something and gives you something. The tenant is purchasing exclusivity and TIME. The option ensures they have the sole right to purchase the property for a fixed time(2 yrs), for a fixed price. During this time they keep current on their rent(which you can afirm to their bank a good payment history), they try to correct any dings in their credit, and they save for a downpayment toward their loan. You can help with this too, as at the closing table, you can award them $50-100/mo for every month that they paid their rent on time (e.g. if they had a 24 mo Option and they paid rent on time every month--when they got to the point of getting a loan you could fund them $1200-2400 toward their loan downpayment). The tenant pays you several thosand dollars for this Option--what they buy is time and exclusivity.

The money they pay you is never called a Downpayment or a Deposit. It is a non-refundible Option FEE. That fee repays YOU for keeping your property off the market, turning down other offers, and keeping the price fixed (even tho the property may appreciate in those 2 years). I even told my tenant buyers once that I would furnish them the $3000 they pay me for the Option, at time of closing to go toward their downpayment on the bank loan, if they followed all the requirements and actually got a loan at the end of the period.

The problem with selling with an Option to Buy is--that the tenants almost always have NO dicipline, they do NOT save towards a downpayment, they do NOT clean up their credit, and they can still NOT qualify for a loan at the end of the Option. They do NOT pay thier rent on time, they buy honking new trucks, big screen TVs, go on vacation, and their credit is worse 2 years later than when they started. Once I even gave them a 3rd year--extended the option and they still couldn't do it. But at least this way you are able to get the bad tenants out (if you have to) and get control of your property back. If you SELL to them on an installment Land contract, when they fail to make the payments, you have to foreclose on them!

now is a great time to do the lease / option. personally, I dont like houses so any way I can get rid of them a a good price is OK with me.

what Mr rational said.

I wish I found this site when we did a lease to own. We got scr**d and it cost us.

And whatever you do, do not let them do any fixes, renos, upgrades, while they are "leasing to own", if they do a lousy job and you get the place back......

Be very careful. you might be set up for a scam based on your inability to evict befor 6 months of non payment are over...

How well have you screened these people? how long have they been renting from you? What's their proposal?

Thanks, Rational--I get tired of typing that all the time!

PAUL--What you ae calling "rent to own" is more accurately called a Land Installment Contract. That is where you actually sell the property to the buyer with YOU acting as a bank and giving them the loan--and accepting back the payments in monthly instllments. That is what Gerri(IN) means, and she and her lawyer are right! When you sell this way--the buyer becomes the owner and all their bad money habits can impact the PROPERTY. AND they have equitable interest in the property--so you never get back clean title.

Thanks for the great suggestions, I really like the idea of wording it a buy option fee.

So if they don't but the house withing the allotted time period the money put towards the buy option fee is forfeit?

There are benefits to doing a lease option however there is risk as well. THere are several benefits to a lease option to you, they are:

You get the hopefully large non refundable option fee

You make them responsible for either all or a much larger part of the property maintenance (though the owner is always ultimately responsible for this some RTO people will still follow this)

You have a chance, definitely less than 50% and sometimes almost nil, a chance of them buying the property from you for top dollar as is with no realtor commision. Rent to own is a sellers tool leaving no room for them to negotiate.