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Rent to own homes are available in almost any one of the subdivisions in Plainfield, but there could be a hidden risk to your arrangement, and the money you put up for a down payment.

There are quite a few investors who purchased homes from homeowners in foreclosure, that are now in foreclosure themselves. It’s important to have properly prepared contracts in place when putting down a lump sum down payment for a lease option and to have it reviewed by an attorney.  The property you have made arrangements to purchase could go into foreclosure without you ever even knowing about it.

Investors often buy property with the intent of renting it out, but many new investors got into the market in hopes of making fast cash by flipping homes.  A large portion of the investors that got into the business to flip houses were banking on the previous double digit rate of appreciation.  That market crashed and burned a long time ago, and a lot of investors are now faced with homes that are worth the same or less than what they paid a few short months ago, which makes it impossible to sell without having to pay large amounts of money out of pocket to be able to sell the house.

Since the plan was to only rehab and sell the property in a short amount of time, these investors often take out loans with high rates of interest from sources known as “hard money” lenders.  When real estate investors own multiple properties, the extremely high holding costs on a hard money loan add up very quickly.  As a means to keep their loans current they often end up offering the property for rent, or as lease option to purchase. They intend on keeping up with their payments, but there have been instances where the landlord used the rent money for things other than the mortgage.  In that case, while you are paying the rent in full and on time, your landlord could be sliding further and further into foreclosure and pocketing your rent check for more immediate needs.

Rent to own options can be any arrangement that you agree upon with your landlord, but it often involves putting a non-refundable down payment towards the future purchase, in exchange to secure a price against future appreciation.  Lease options that were written in the hay day or all of this real estate madness could have serious implications because deal the tenants thought they were getting, may not be such a great deal anymore.  Even in situations where the tenant and landlord prepare to proceed with the arranged sale and the agreed upon price, appraisers always have the final say when it comes to getting the loan.  The appraisal is the banks protection against default when it comes to lending out money.

I personally think that rent to own options are great opportunities for renters who want to own a home of their own, but I highly suggest the services of a Plainfield Realtor and the legal advice and review of the contract with a private attorney. There are some really great landlords out there, but there are some really shady ones too.  Do your due diligence and research the property before you sign any papers. Here is a link to Yahoo’s Rent vs. Buy Calculator.

Here are some things to look for if you suspect that the home you have contracted to purchase is in foreclosure:

• The landlord delays repairs or maintenance on the property.
• A registered letter is delivered by the Will County Sheriff’s Dept for the owner.
  
• A representative of the bank comes to the home asking to speak to the owner.
  
• Late notices arrive in the mail addressed to the homeowner.
• Letters and notices from other investors offering to avoid foreclosure arrive in the mail.  Default notices are public record in Illinois.
• Someone from the street is photographing your house from the car or curb.

Your landlords foreclosure will affect you.  This link is an article about landlords in foreclosure explains the process and the implications it will have on your situation.

If you are currently renting and want more information about how to purchase your first home to take advantage of today’s great home prices, call me at 630-673-6233.  I can put you in touch with the right people to make the possibility of owning your first home a reality in less time than you might think.

Real also: What First Time Home Buyers Need To Know
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