rent to own or owner financing questions?

when a person does a rent to own or an owner financing what exactly happens? You pay a monthly payment as you would w/ the bank then at the end of the term you own it (like w/ a bank)? What about the person you buy it from. Do they own it? Do you own it? Who controls it? Is it the restrictions of renting or freedom of buying? which is better and why?


in a rent to own what are the rights of the 'buyer' and what are the rights of the 'seller'?

5 Answers

  • 1 decade ago
    Best Answer

    If it is true owner financing, that is the seller executes a deed to you and takes back a mortgage (or deed of trust), then you own the property just as if you bought it with a bank loan. The seller is just the lender. Sellers frequently require a large down payment since they are actually deeding the property to you.

    The next step down would be an Installment Land Contract (also known as a Contract for Deed or a Bond For Title). In this case you would have equitable title but the owner would retain legal title until you fully pay for the property.

    The next step down would be the rent-to-own (lease option, lease purchase, etc.) where you as the tenant-buyer would typically only have a leasehold estate in the property until you exercise you option to purchase and close with a bank loan. Usually you can enter into this type of transaction with a smaller “down payment” (actually an option payment or purchase deposit) than the two above.

    The rights of the parties involved will boil-down to the terms of the specific agreement and the laws of the state where property is located.

    Make sure, via a title search, the person(s) you enter into the agreement with is the only person(s) with an ownership interest in the property. The last thing you want to happen is for you to make payments for months or years and then find out the person you have a contract with cannot actually deed you the property.

    The assistance of an attorney, familiar with real estate laws in your area, would defiantly be a wise investment.

    Good Luck

    Hope This Helps

  • Anonymous
    1 decade ago

    Everything I say here is based on Pennsylvania - do not assume it is the same elsewhere, check it out. I am not giving anyone legal advice or counsel.

    First, if you can get the same price always get an interest in the property.

    This is called equitable interest. You can get it with an option, lease option, right of first refusal, lease purchase (aka land contract, contact for deed...) You have more rights with any of these then just a lease. For example in PA, as long as your right to buy exists, a landlord can not use the District Court (landlord tenant complaint) the case must be heard in the court Common Pleas. This takes longer and costs the land much more.

    No matter the form of your agreement, be sure your interest is protected. That means filing documents with the court. There are many good rehabbers/flippers, but there are a few very bad ones. Also you want to be protected should the owner be sued by someone else.

    It sounds like you are taking the time to study and make an informed choice. I suggest that you check out your local real estate investment groups. They really can help you. The National Real Estate Investors Association has a web site that can help direct you.

    Source(s): ME = Real Estate Investor in Pennsylvania & JUDGMENT Collection and & Resolution Specialist Western Pennsylvania Real Estate Investors Association, DIG Diversified Real Estate Investors Association, Pittsburgh ACRE, Pittsburgh Delta Group (closed), and many seminars
  • 3 years ago


    Source(s): Rent To Own Houses :
  • 1 decade ago

    Have an attorney go over any contract with you BEFORE signing it.

    Generally you rent the place for X years because you have lousy credit and no down payment. At the end of X years, part of your rent money has accumulated to a small down payment and you are required to get a mortgage an buy the property from the owner. It is NOT yours until this happens. If you default, move out, whatever, the portion of rent which was being accumulated for your down payment is gone. It can be a path to home ownership for those who won't otherwise qualify.

    Source(s): real estate investor
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  • 1 decade ago

    rent to own the title does not pass until it is purchased later. with owner finance the title would pass and part of the agreement would be that in 5 years or so the buyer would have to obtain traditional bank financing and pay off seller in full.

    yes you would make monthly payments like with a bank.

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