Renter · Baltimore, MD · Member since 2009 · 2 posts · 0 votes
Looking for advise on rent to own after bankruptcy. I don't know where to start. Tooooo many scammers advertising---buy houses for pennies on the dollar---etc and they want to sell you a list!!!! Im also hearing about assumable mortgages--where do I turn? :roll:
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
A legitimate rent to own (aka lease option) purchase will not be for pennies on the dollar. It won't involve any lists. It will be for a specific house. It should involve a small amount of option money, typically 3% of the price of the house. That give you the right to purchase the house at some point in the future. You should negotiate for a specific price for the purchase, not "as determined by an appraiser". Set the price now, not later. You should try to get some rent credit. When you do eventually buy, the option money and the rent credit should show up as a credit to you from the seller.
There are lots of bad actors in this space. A common trick is to collect the option money, deposit, and then try to evict you as soon as possible. The lease will have all sorts of unusual requirements, and it will be easy for you to break one of these and make you subject to eviction. Or, make the option be invalidated.
For example, the option might state it is valid only so long as the rent is always paid on time. But if there rent is ever late, the option is voided. What that means is that if you pay your rent late even by one day, you no longer have the option and you lose your option money.
Keep in mind that Fannie Mae guidelines require five years from the bankruptcy before you can get a new loan. That a long time for a lease option. Two to three years is more typical. So, if the bankrupcty is recent, this may not be a good path.
There are almost no assumable mortgages for houses. Investors do sometimes buy "subject to" where they take over the payments on an existing mortgage. There are some risks, and I don't think I'd recommend this for an owner occupied house.