For Sale or Rent By Owner - 4 Easy Steps To Make It A Smooth Process

For Sale or Rent By Owner is becoming extremely popular due to the banks and mortgage companies requiring higher credit scores and a larger down payment. In this article we explain 4 simple steps to make sure if you're buying or renting a home by owner you will be protected by potential problems that could arise.

Tired of living in apartments that has noisy neighbors, barking dogs and flights of stairs to climb everyday? You don't have 20% to put down? You can make getting into a home a reality. There's sellers everywhere willing to negotiate. Some interested in owner financing, which was once called 'Land Contract' years ago and goes by the term Lease Purchase/Option now. Typically, the properties for rent are your best bet for a lease option. Since we don't live in a perfect world, there are things that could come up to make this process a pain. The most important things to make sure you have in place are:

• Contracts - This is the most important thing to have, and it should explain everything. Who's in charge of lawn work and repairs. What is necessary to get your security deposit back and what could void you getting it back once you move.
• Repairs- As we stated in the contracts section, make it clear who is responsible for repairs. Typically, if you are renting, all repairs are the landlords responsibility. If you are purchasing through owner finance, the tenant is responsible for all repairs. The tenant could negotiate that they are responsible for a certain dollar amount a year in repairs, with anything over that amount be covered by the home owner.
• Deposit - One of the biggest problems that comes up once a tenant moves out, deals with the security deposit. As stated above, having every detail of the tenant getting it back and what would void it being returned will cause a lot of problems and potential court cases.
• Escrow - Finally, probably the most important of them all would be setting up your payments in an escrow account. If you're renting, you won't have to worry about escrow as much as if you were purchasing through owner finance. You ask why is an escrow account so important? Say, the home owner is putting a percentage of your monthly payments towards the sales price, reducing what you would have to get a mortgage for (I will explain deeper in another article). Suddenly, there's a knock at the door, saying this property is in foreclosure. What?!?, you've paid them on time, every time. However, they didn't pay the mortgage company and now you become homeless and all the equity you've built up in this property is gone. If you had an escrow set up, you pay the company, that company pays the mortgage and you still have a roof over your head.

Using these steps will allow the process to flow smoothly.
If you have any questions, feel free to comment below or email us. We have over 12 years experience helping clients buy, sell or rent real estate.