Usually a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower defaults and the lender tries to repossess the property, courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. While this equitable right exists, it is a cloud on title and the lender cannot be sure that they can repossess the property.[4] Therefore, through the process of foreclosure, the lender seeks to immediately terminate the equitable right of redemption and take both legal and equitable title to the property in fee simple.[5] Other lien holders can also foreclose the owner's right of redemption for other debts, such as for overdue taxes, unpaid contractors' bills or overdue homeowner association dues or assessments.
Historically, the vast majority of judicial foreclosures have been unopposed, since most defaulting borrowers have no money to hire counsel. Therefore, the U.S. financial services industry has lobbied since the mid-19th century for faster foreclosure procedures that would not clog up state courts with uncontested cases, and would lower the cost of credit (because it must always have the cost of recovering collateral built-in).[citation needed] Lenders have also argued that taking foreclosures out of the courts is actually kinder and less traumatic to defaulting borrowers, as it avoids the in terrorem effects of being sued.[citation needed]
Just remember, you will need to get the seller to agree on not only the rent to own agreement, but the terms of the agreement. i. e., length of the agreement, usually, one to two years; the percentage of the rent which gets applied to the sales price or closing costs, etc. If you get lucky, the seller may also be interested in doing Seller Financing with you. Just be sure to have a lawyer review any agreement before you sign it. A little legal cost upfront could save you thousands of dollars down the road.
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