Does this happen very often? If I was going to buy a home I think I’d rather rent it for 2-3 months before buying it just to make sure there weren’t any problems that I wasn’t aware of at the time of purchase.
I don’t think I’ve heard of people doing this though. I’m assuming in part because the house is usually being lived in by the family selling it at the time. Or because if someone buys it you’d have to move out rapidly.
Are there realtors or sellers who make it a policy to allow a potential buyer to live in a home for a period of time before deciding to buy it?
No. Not really. Either the owner is selling the house or renting the house. No home owner wants to carry two mortgages for a while to see how things work out for the other guy.
“I’d really like to buy this car, but I think I’ll just lease it for 3 months to see if I like it, OK?”
Sometimes it happens if the only reason the owners have it for rent is because they have been unable to find a buyer. This is uncommon in my experience.
We rented our house for 2 months before buying it but only because the sale of the condo went through and we had to get out but the purchase of the house was being delayed by the mortgage company being a pest. The estate of the previous owner allowed us to rent from right before Thanksgiving until the end of January when the paperwork was finally finalized.
The lawyers and our realtor told us that it’s very uncommon to do what we did but in the case of a motivated seller and a very motivated buyer, it does happen. In our case, there was no doubt we were going to buy. The mortgage company just wanted some things fixed before they finalized the paperwork. The estate was willing to do the fixes. So everyone was on the same page and wanted the same end result. I can’t imagine it working in any other situation.
There is such a thing as a lease option in purchasing a home. The contract is typically 6-24 months, so, longer than what you may have in mind. It is done for financial reasons as much as anything else, so the potential buyer can accumulate a down payment.
If the main concern is “problems” with a house - well, that is what home inspections are for, really.
We rented a house until the lender refused to make the loan on it because it didn’t pass the inspection - see mrAru got transferred from the USS Spadefish stationed in Norfolk VA, taking the shore duty spot of the guy they were transferring down to the Spadefish to take his spot. Silly if you ask me but WTF. He mentioned needing to sell his house, and let us stay in it when we went up on leave to househunt, and we decided we liked the house and location so we told him we would rent it for what he was paying on the mortgage while the paperwork churned through. We were both pretty miffed that the previous to him owner managed to reroof it with the beams more than 16" on center, support the floor [single level house over a half basement, half crawlspace] on a temp post thingy instead of a real post and something else. mrAru and I surmise that somehow the inspector was bribed or something. Luckily the place we have now hit the market and the listing agent was also our agent and we looked at this place the morning it hit the market and we snapped it up within an hour of it listing. The guy we were renting the other place from basically used the military transfer and need to get rid of the mortgage clause to ditch the mortgage without prejudice.
Unless the seller is really having a problem attracting buyers this is unlikely to appeal to them. Why tie up the house for several months with no promise of a sale at the end?
Which is exactly why no one is familiar with this scenario anymore - we haven’t seen market conditions where this makes sense.
If I understand correctly, the lease option contracts are typically written so that the potential seller gets to keep some chunk of money from the potential buyer, if the buyer backs out. The buyer puts up some sum of money to purchase the option. If the buyer goes through with the sale, it becomes part of the down payment. If not, it goes to the seller to compensate him for his trouble. I think.
I think the most common way that might happen is if the renter rents a house then convinces the owner to sell it. But that is more of a “it worked out that way” as opposed to “planning it that way.”
Actually, my GF is planning on renting her house and just yesterday someone expressed interest in leasing for 6 months and then buying when her house closes. She’s talking to her RE Agent about if it’s possible to structure this as a 1 year lease with an out clause if she buys the house at a certain point. But she has no intention of going forward unless the renter/buyer is tied in to a one year long lease.
When we had a house on the market two years ago, two of the four offers we received had an initial period of renting before they’d commit to buy. They were both cases of “we’d love to live in your house but we don’t have the cash or the credit to buy it. Want to let us trash the place while we keep applying to banks?”
Rent to Own offers seem to be gaining in popularity around here. It seems to be a combination of sucky credit on the part of the renter/buyer and a desire to bring in some sort of income on a home that’s otherwise not selling. A portion of the “rent” goes to the owner, same as any rental, and a portion goes to the “sale” - I’m guessing it’s put in some sort of escrow account - and can be used as all or part of a down payment.
This site also mentions credit counseling as part of the process, presumably so the renter/buyer can repair his credit score before the actual mortgage part happens.
When my house was on the market (and the market was not good) I had a couple of people who were interested in renting while they gathered a down payment. All the horrible landlord/tenant possibilities and the eviction possibility made me say no way. The market recovered and I got my asking price.
When we were looking for rental houses in the 3-4 bedroom range late last year, we saw quite a few houses that were both for sale or for rent. The house we ended up with was supposedly only for rent, but our landlord has been dropping none-too-subtle clues that we should just buy it.
I think there are a lot of people who would love to offload their houses, but can’t really afford to take the loss they would selling in today’s market, so if they can cover most of the mortgage and taxes with a renter it makes sense to rent it out and hope for improvement. If there’s a chance the renter might turn into a buyer down the road, all the better. If nothing else, when the market improves you probably have a bit of a negotiating edge if your renters are already moved in and in love with your house.
That’s what happened to me. I rented for 18 months, then decided I wanted to buy somewhere. When I told my landlord, he said he would probably put it up for sale once I was gone as he’d had enough of the hassle of renting. It worked out well for both of us.
I did have one problem with the mortgage though. My bank didn’t feel happy lending to someone who was buying a house with a sitting tenant. Even though I was the tenant. I had to pay a solicitor to notarize a form saying I would move out before the new owner completed the sale! I went to work in the morning if that counts?
Further proof that banks are idiots. Their concern was probably the difference between rates for a primary house (that you’ll live in) and a secondary rental property. Since you were buying a rental property, the ‘tenant’ had to be notified that they were bounced on the settlement day. Talk about dumbos!