Seller FAQs

Seller FAQs

Q: How does the process work?

Answer: On the seller side, if you decide you would like us to begin marketing to place a tenant-buyer into your property, please refer to the link below that needs to be completed online, or printed, signed, and faxed back to us at 866-552-3970.

The Lease Option Agreement Memo (click for formgives us permission to start advertising your home to our tenant-buyers.

Once we receive the completed and signed document from you, we will schedule a property visit to take pictures, shoot a video, and then begin marketing your property immediately for a tenant-buyer.

From the Tenant-Buyer side, the process works as follows:

  1. Submit a Rent-To-Own application via our website
  2. View the property (we will schedule this accordingly)
  3. Submit a deposit to the escrow company to secure the property
  4. Be approved by the seller
  5. Agree to the terms of the lease and option agreements
  6. Sign all documents at the title company
  7. Get the keys and move in!

Q: How do we decide on a purchase price?

Answer: We can always go down on the purchase price, but not up, so once we see your home, talk with you, and review the comparable sales, we will set everything as high as possible but still keep it reasonable for the market. Again with Rent-To-Own, we can be on the high side vs. if you were trying to sell immediately via a Realtor in the MLS.

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:

  1. Lower the tenant-buyers’ purchase price to the appraised value; or
  2. 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.

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 to the purchase price. The amount varies based on the seller, however we suggest a minimum of $100/month.

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.

Anytime we have had a tenant-buyer not purchase, they leave the house in excellent condition, and many have done improvements to the home, leaving the seller with an improved property. We do a thorough back ground, employment and rental history check. Plus, we encourage 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, but it is very rare to have 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 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: 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 up to 7% of the purchase price of the home goes to our company. If the tenant-buyer happens to put down more than 7%, then all of those monies go directly to you.

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. Therefore, we try to put this fee on top of what you want to net at closing when they go to purchase. For example, if you wanted to net $100K at closing, then we will market your property for something like $109,900, so that once the down payment is deducted, you still net 100% of what you wanted to net.

**Again, in this example, if you listed your property with a Realtor at $100K, then you would only net between $80K and $85K after Realtor commission (typically 5%-6%), seller concessions (typically 3%-6% of the purchase price), low ball offers (the average is 7% less than your asking price), and your side of the closing costs (typically between 2%-3% of the sales price).

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).

Q: Is the option fee/down payment used for the tenant/buyer’s closing costs?

Answer: No, the option fee/down payment is not used towards their closing costs, but is applied directly to the purchase price. When it’s time for them to get the loan to purchase your home, they are contractually obligated to pay 100% of the closing costs (not split like it would be with a traditional Realtor contract). Therefore, in continuing the example from above, if we marketed the example home for $109,900, and they put $5,000 down, then they will need to obtain a loan to purchase for $104,900 plus the closing costs.

Q: I know that certain mortgages like FHA do not allow a seller to give money to a buyer for a down payment, isn’t this essentially what would happen?

Answer: No, you are not giving the tenant-buyer ANY money for their down payment with our program. They are actually putting their own money down upfront, and because it flows through our attorney’s escrow account as a down payment, the lender will have no trouble counting the upfront down payment/option fee as a down payment. Any rent credits which may be accrued are applied directly to the purchase price, not the down payment.

Q: What percentage of your tenant/buyers actually end up purchasing the property?

Answer: All the properties eventually sell via rent-to-own, but there have been properties where it was the 2nd family or 3rd family that purchased. We used to do 12 month contracts but based on that statistic we upped the initial term to 18 months this past year. In all cases, they were stellar tenants and the seller worked with them…for some the rent went up, but none were charged an additional option fee to extend.

You may find that stats for other companies are far lower. So much so that many times, people find our stats hard to believe. We’ve talked to a few companies who do what we do, or something similar, and find that for the most part, they put the first person who has some decent cash to put down regardless of their ultimate goals, finances, credit, etc. We make it an explicit point not to do business this way for a number of reasons…most importantly, this is not in either the buyer or seller’s best interest! You want to sell, the buyer wants to buy and we do our best to make sure that happens.

Q: What are the benefits to the Rent-To-Sell/Rent-To-Own model?

Answer: The Seller has a family living and caring for their property to a much higher standard than that of a typical renter. Every last one of our properties that “turned over” (meaning didn’t sell on the first round and was re-listed for rent-to-own again) was left in a condition that was literally move-in ready for the next family, with the exception of maybe an overall cleaning.

Our tenant/buyers can test out a neighborhood and get a strong feel for what home ownership is all about. Should the tenant/buyer not like either, they can move on. The tenant/buyer also has time to repair their credit and secure financing on a property that they would otherwise have missed out on.

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We hope the Answers to these Frequently Asked Questions helped give you confidence in our Rent-To-Sell Program.

Once again, if you decide you would like us to begin marketing to place a tenant-buyer into your property, please refer to the attachment that needs to be completed online, or printed, signed, and either faxed back to us at 866-552-3970, scanned and emailed to Info@NewHorizonFamilyHomes.com

Rent To Own Home Articles For Buyers And Sellers


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