You need up-to-date advice on LOCAL landlord/tenant laws, espcially regarding non-payment, eviction and inspection notice.

No matter how tidy the fellow is, a lived-in house always sustains some wear and tear and aging of surfaces and appliances. So if he doesn't buy it, you will have some additional costs to bring it back to ready for sale state. Just take those costs into account.

Excellent to keep renting separate from purchasing contracts. You're not really talking about rent-to-own in the conventional meaning of crediting part of rent towards purchase price.

It's the same as the VW "sign and drive" commercials. You're really proposing "rent and THEN buy".

I replied on a similar topic, scroll down for for what I wrote regarding additional issues regarding taxes, mortage and insurance in reply to another poster who queried on a related rent to own topic.

I'd run the numbers both ways: money coming in (and going out to cover reconditioning to get it ready for sale if this deals falls through, which I would build in as an assumption) plus your carrying costs in the interim vs as stiff as necessary price drop now to get it sold and move on immediately.

Good luck..

L.

If you've had several offers at a much lower price, then that's what the market is telling you that the home is worth. Take the loss, and leave the headache behind. It a special kind of hell to be a landlord when you don't really know what you're doing. It's a lot more expensive than you think it is to be a landlord.

The renter is often at more risk than the landlord.

the renter is betting you will be able to deliver clear title at some future date.
You could mess up ad have an IRS lien attached .

Have separate contracts drawn up for the lease and have him give you a non-refundable deposit on an option to purchase.

The option often sets the price and terms of the purchase.

The option price is to give him an incentive to maintain the place (or at least not do any excessive damage) and you the money needed to bring it back to salable condition.

From your view point, more money is better.
He of course would prefer less.

Your risk is for a wild price increase during the option period.

I have sold a couple houses as actual rent-to-buy type contracts.
Both went to professional level folks with medical related bankruptcies.

Both worked out well.
I gave a rent credit, and the option price had an 'increase clause'.
Both couples got back on their feet quickly and exercised the purchase option in less than 18 months.

Both behaved far more like owners from the get go, likely reenforced by making them responsible fr AL maintenance during the option period.

Without needing to set aside rent money to cover maintenance issues, the credit they got did not really hit my finances.

Make sure you have a very good RE attorney draw up the agreements.

This post was edited by brickeyee on Sun, Jun 2, 13 at 8:39

Couldn't you write it up as a rental document with him having first right of refusal to buy within 12 months (or 18 or 24--whatever suits you)?

It really does sound to me like you are doing a rent, THEN buy situation, also.

brickeyee, that is the sort of info I was after. We have a really good contract/real estate lawyer who will go over everything and advise. we absolutely don't want to be landlords if we can help it, the realtor is saying don't lower the price, it will sell, any lower and we will be giving it away... so maybe at 94 days on the market (about 60 on active listing due to failed initial contract) I am in too much of a hurry. we have another showing today. thanks everybody for the input.

There are a ton of pitfalls in this type of relationship. You really do need an attorney who specializes in this type of draft. It can be done, but every term and condition needs to be spelled out.
Brickeyee, do you ever have any problem with lenders accepting your buyer's rent credit? I have heard that the lenders will not accept this type of "income" from the buyer because it comes from the seller. How do you get around that?

2 separate agreements is the way to go.

Rent at a market rate (which, if it's like our market, may be a fair amount higher than a mortgage payment would be). Sign a purchase agreement with a long closing date and a significant deposit/earnest money. Both of those will serve to be strong incentives for him to close the purchase deal down the road, and provide you sufficient compensation if he doesn't fulfill his part of the deal.

Have him fill out a typical rental application, ask him a lot of detailed questions, and then do extensive background check: look at his credit report, verify his employment, get a copy of his tax return and/or W2, look at court documents to find where he's filed for divorce, look up current property records to make sure he owns and that his house is on the market, do a criminal background check. You're looking to verify whether or not he's telling the truth. If he lies about something, that's a warning sign about entering into this type of deal with him.

BTW, markets can be goofy. We've had a

I lowered the price by the 'credit' amount.

No one objected.

Both occurred before the recent tightening of rules and excessive underwriting scrutiny (the pendulum has swung a little to far the other way.)

This post was edited by brickeyee on Sun, Jun 2, 13 at 8:43

weedyacres, exactly whats happening here.... we do have plans to do what you and others have suggested, and our really great lawyer will help with his input. I would so much rather just
sell it and be done though. the guy doesn't have his house on the market yet, though he claims to be preparing it to sell. I am concerned that if his divorce agreement isn't already written and signed we may end up as landlords indefinitely
and the house not sold at the end. my tendency is to not want to go through with this, but if he can convince us we will all have a happy ending (through documentation and good results in all our homework) would consider it. I was just wondering if anybody out here on the forum had experienced this sort of
situation and made it work for them. Everybody, your input
is valuable and appreciated! Thanks for the collective wisdom.

egbar, I was approached by a friend this year inquiring about rent to own with a house I was readying to sell. It was awkward since a friend, and I was envisioning having the house back at some point (like in a slow winter market) since the marriage had been long troubled but enduring:)

The marriage is still enduring, and I listed, closed the sale last week.

However, my sister reminded me that she bought a house several years ago under just the terms you are describing. Her now ex was delaying a final divorce decree and she wasn't free to buy a house in her own name only until that division of properties was settled. She found a seller willing to work with her and it turned out beautifully. She did buy the house after renting several months, did not have to move her belongings a second time or disrupt her childrens lives any further than had been already.

morz8, thanks for that, I love a story with a happy ending!
we lowered our price again at the time we got this offer, and lo and behold we have reached our "perceived value" price, and we have got 2 more offers to consider now.
by the time we get through examining them we may not have to rent the house out at all. One of the offers seems to be pretty solid! thanks to all!

hooray, got a contract that doesn't entail rental at all , except the new owner wants to use it as one! thanks everybody, now check out the decorating forum and give me ideas on what to do to help the curb appeal of the "new" 1948 ranch we will move to? thanks again.