Lease Purchase a Florida Home
When a buyer enters into a lease purchase agreement on a Florida home, he/she has taken out a lease on a house with the option to buy the home within a certain period of time, which is generally three years. A North Florida property title search will be conducted to check for any issues with the title of that property so the lease purchase agreement can be agreed upon.
Rent to own homes in Central Florida have become fairly common in recent years. This is because, since the last housing bubble burst, many aspiring buyers cannot immediately meet the tougher loan requirements that were imposed in the wake of the crisis, and many Central Florida sellers cannot get satisfactory sale prices without offering rent to own arrangements.
Who Should Consider the Lease Purchase of a Florida Home?
People who need time to improve their credit, have been employed less than a year, or own their own businesses often have trouble qualifying for mortgages in the short term. So do people who have been through bankruptcy, foreclose or a short sale. These are the buyers for whom rent to own homes are often a solid, preferable choice.
Similarly, even sellers who believe a straightforward cash sale is achievable may prefer rent to own arrangements. Buyers who cannot find another option often commit to a higher future price to make the deal, and even if the deal subsequently does not work out, the seller almost always keeps the option fee and rent premium (explained below). He/She also continues to receive a tax deduction on mortgage interest payments while the option period is in effect.
Are you in the process of refinancing your current home? Do you need help with home title services? If you have any questions or needs, contact our Attorneys to find out how we can help you easily navigate the real estate purchasing/mortgage process and how we can provide you with the peace of mind you deserve. True Title is a company setting a standard of excellence industry-wide. We at True Title have been committed to excellence in customer service since 1998.
How Does the Lease Purchase of a Florida Home Work?
When a Lease Purchase (rent-to-own) arrangement is fair, it provides benefits to the buyer and seller alike. It is, however, possible to structure such a deal so all the benefits go to one party and none go to the other. In such a case, the party who loses out is often the buyer, so it is important for buyers to understand exactly how the lease purchase of a Florida home works.
The borrower generally pays an option fee, typically 1% to 3% of the asking price, which is credited to the purchase price. He or she pays a market rent and also an added rent premium. The rent premium also counts toward the purchase price.
It is important for buyers to know that the option fee and period, rent and rent premium, and purchase price are all subject to negotiation. Buyers also need to understand that if they end up not availing themselves of the option clause, the option fee and rent premium are nearly always forfeited.
By the same token, buyers should understand that while option fees and rent premiums do count toward the purchase price, they do not reduce the eventual down payment unless the seller does agree to forfeit those payments if the purchase option is not exercised. It is, of course, rare for sellers to do this given that the right to hold on to that money is part of what makes a rent to own contract appealing to them in the first place.
Buyers generally like a long option period. It gives them more time to save money toward the purchase of the rent to own home and improve their credit. The potential drawback is that if, in the end, they do not exercise the option to buy the property, they lose more money because they have paid more in non-recoverable rent premium.
Sellers generally prefer a shorter option period, but if they are realistic, they understand that if they insist on it being too short, the home just will not sell.
Buyers and sellers have different perspectives on option fees and rent premiums. Buyers see them as contributions to the equity of the home they ultimately anticipate owning. Because of their non-refundable nature, sellers see them as an incentive for the buyers to follow through and actually make the purchase. If the buyers do not follow through, at least the sellers still have the added income.
Some lease purchase contracts give the buyer the option to sell the purchase option. That can be attractive to a buyer who is not certain that he or she will, in the end, be able to use the option. It can be a cost to sellers who may well prefer to simply retain the rent to own home and all monies collected.
It is also possible for the contract for the lease purchase of a Florida home to contain provisions that take away the buyer’s option. For example, the buyer might lose the option if he or she fails to pay the rent by the first of every month.
These provisions are particularly prevalent in contracts with the owners of multiple homes, such as, for instance, developers. Buyers need to understand their contracts completely to avoid running afoul of such conditions.
The Florida title professionals at True Title are ready to assist you with your lease purchase transaction. Our Florida title insurance company employs some of the brightest minds in the business, and they eagerly await your call. If you have any questions about Florida property title searches and the process involved in lease purchase agreement, we are here to give you the answers you need. Call now to get started at (877) 785-8792 or send us a note online.