In the proceeding simply known as foreclosure (or, perhaps, distinguished as "judicial foreclosure"), the lender must sue the defaulting borrower in state court. Upon final judgment (usually summary judgment) in the lender's favor, the property is subject to auction by the county sheriff or some other officer of the court. Many states require this sort of proceeding in some or all cases of foreclosure to protect any equity the debtor may have in the property, in case the value of the debt being foreclosed on is substantially less than the market value of the real property; this also discourages a strategic foreclosure by a lender who wants to obtain the property. In this foreclosure, the sheriff then issues a deed to the winning bidder at auction. Banks and other institutional lenders may bid in the amount of the owed debt at the sale but there are a number of other factors that may influence the bid, and if no other buyers step forward the lender receives title to the real property in return.

It’s critical to sign an agreement that is in your best short- and long-term interests. The rent-to-own option will cost more than a traditional home rental because there are other costs baked into the monthly amount. The good news is these “other costs” such as the initial option fee and monthly credit will go toward the final purchase price. Nevertheless, a rent-to-own contract should always include the length of the rent-to-own lease agreement (usually anywhere from 12­ to 70 months), the amount of initial option fee (usually 35 percent of final purchase price), the final purchase price at the end of the term, and the amount of the monthly payments that will go toward the purchase price. These figures are all negotiable.
Rent to own housing is a popular choice for home buyers who may not qualify for a traditional mortgage, or lack the funds needed for a large down payment the lenders require. Rent to own properties help to overcome these situations for those who are ready to commit to a purchase. Buying a rent to own home can provide an easier approach to purchasing a home because it starts with a familiar lease agreement. Buyers of rent to own homes will rent, or lease, the home for a designated period of time. The great benefit for renter-buyers is that over time, a portion of the monthly rent payments are applied toward the ultimate purchase of the home. Plus, the final purchase price is determined up front in a lease option agreement, so there is no risk that the purchase price will rise later.
In the proceeding simply known as foreclosure (or, perhaps, distinguished as "judicial foreclosure"), the lender must sue the defaulting borrower in state court. Upon final judgment (usually summary judgment) in the lender's favor, the property is subject to auction by the county sheriff or some other officer of the court. Many states require this sort of proceeding in some or all cases of foreclosure to protect any equity the debtor may have in the property, in case the value of the debt being foreclosed on is substantially less than the market value of the real property; this also discourages a strategic foreclosure by a lender who wants to obtain the property. In this foreclosure, the sheriff then issues a deed to the winning bidder at auction. Banks and other institutional lenders may bid in the amount of the owed debt at the sale but there are a number of other factors that may influence the bid, and if no other buyers step forward the lender receives title to the real property in return.
Rent-to-own agreements should specify when and how the home’s purchase price is determined. In some cases, you and the seller will agree on a purchase price when the contract is signed – often at a higher price than the current market value. In other situations, the price is determined when the lease expires, based on the property's then-current market value. Many buyers prefer to “lock in” the purchase price, especially in markets where home prices are trending up.
“As home prices rise and more and more cities are priced out of conforming loan limits and pushed into jumbo loans, the problem shifts from consumers to the home finance industry,” says Scholtz. With strict automatic underwriting guidelines and 20% to 40% down-payment requirements, even financially capable people can have trouble obtaining financing in these markets.
Recent housing studies indicate that minority households disproportionately experience foreclosures. Other overly represented groups include African Americans, renter households, households with children, and foreign-born homeowners. For example, statistics show that African American buyers are 3.3 times more likely than white buyers to be in foreclosure, while Latino and Asian buyers are 2.5 and 1.6 times more likely, respectively. As another statistical example, over 60 per cent of the foreclosures that occurred in New York City in 2007 involved rental properties. Twenty percent of the foreclosures nationwide were from rental properties. One reason for this is that the majority of these people have borrowed with risky subprime loans. There is a major lack of research done in this area posing problems for three reasons. One, not being able to describe who experiences foreclosure makes it challenging to develop policies and programs that can prevent/reduce this trend for the future. Second, researchers cannot tell the extent to which recent foreclosures have reversed the advances in homeownership that some groups, historically lacking equal access, have made. Third, research is focused too much on community-level effects even though it is the individual households that are most strongly affected.[29] Many people cite their own or their family members medical conditions as the primary reason for undergoing a foreclosure. Many do not have health insurance and are unable to adequately provide for their medical needs. This again points to the fact that foreclosures affects already vulnerable populations.[30] Credit scores are greatly impacted after a foreclosure. The average number of points reduced when you are 30 days late on your mortgage payment is 40 - 110 points, 90 days late is 70 - 135 points, and a finalized foreclosure, short sale or deed-in-lieu is 85 - 160 points.[31]
Rent to own homes offer a popular alternative for bargain home buyers and sellers. For buyers who do not have an adequate downpayment available, or are having difficulty qualifying for a traditional home loan, a rent to own (also referred to as 'lease option', 'lease to own', or 'owner financed') agreement can provide a smoother path to homeownership. In a rent to own arrangement, the buyer and seller typically agree to designate a portion of the monthly rent paid is applied to the purchase of the property. The home's purchase price is usually agreed to in advance so there is reduced risk of an increased price at the future purchase date.

It’s critical to sign an agreement that is in your best short- and long-term interests. The rent-to-own option will cost more than a traditional home rental because there are other costs baked into the monthly amount. The good news is these “other costs” such as the initial option fee and monthly credit will go toward the final purchase price. Nevertheless, a rent-to-own contract should always include the length of the rent-to-own lease agreement (usually anywhere from 12­ to 70 months), the amount of initial option fee (usually 35 percent of final purchase price), the final purchase price at the end of the term, and the amount of the monthly payments that will go toward the purchase price. These figures are all negotiable.
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