This is the next post in my series discussing the pros and cons of entering into a Rent to Own contract for both the buyers and sellers of homes in Dayton, Ohio. My last post explained how a future buyer could lose their money invested in a certain property if they are not careful to ensure that a contract is written in a way that protects them. In this article, I will discuss the potential pitfalls that a seller may run into when engaging in a Rent to Own contract.
There are a number of reasons why a seller may wish to enter into a Rent to Own contract, or provide seller financing, rather than engage in a regular sales transaction. Some sellers may like the idea of receiving regular monthly payments. Others may calculate that over the long run that they will receive more money on a Rent to Own contract, when they factor in both the up front fee and the premium monthly payments. Other sellers may not want to go through the hassle of putting their home on the market, having to show it until it sells, and having to pay a Realtor’s commission.
However, there are events that may happen further down the line, that can cost a seller a great deal of time and money. Many buyers who enter into a Rent to Own contract do so because they have a low credit score and are not be able to qualify for a loan. Sellers may find that, after a year or two, their buyers will ‘skip out’ on the contract and leave the home in disrepair. Because Rent to Own contracts generally do not require a large down payment, sellers may find that the cost of repairs is more than the sum rent they have received.
Sellers may also find that it can be a hassle to constantly have to manage their tenants, rather than selling the property and being done with it. In a Rent to Own contract, the seller may still be responsible for repairs, depending on the contract’s language. They will also continue to be responsible for property taxes, and can get stuck with any mechanic’s liens or water bills that their tenant leaves unpaid. Sellers will also have to collect monies on a monthly basis, and chase around tenants who are late. All of these inconveniences can add up over the years, and make entering into a Rent to Own contract not worth it, depending on the seller.
Some sellers may think that Rent to Own is their only option to sell, because they do not have the money to make repairs to their home, that a buyer may desire, or that may be required for an FHA or VA loan. These owners may not realize that there is a strong possibility they could sell their home “as is.” In the current market climate, sellers have more bargaining power, because there is an extreme inventory shortage. Many buyers are able and willing to make a purchase in cash, obtain a renovation loan, or obtain conventional financing that will not require major repairs. Sellers who found that they had difficulty selling their home in the past, may find that circumstances have changed. If a seller wishes to sell their home, but is concerned that it will not generate interest, should make an appointment with a qualified Realtor, and seek a professional opinion.
As a Dayton area Realtor, I am happy to sit down with potential sellers and discuss their options, as well as the cost of selling one’s home. I also service the areas of Beavercreek, Centerville, Cincinnati, Clayton, Englewood, Oakwood, Fairborn, Harrison Township, Huber Heights, Kettering, Miami Township, Miamisburg, Riverside, Springboro, Trotwood, Vandalia, Washington Township, West Carrollton, and Xenia.