Rent-to-own agreements provide an opportunity for buyers to become homeowners without waiting for years to fix their credit or save enough for a down payment to qualify for a mortgage loan. This type of arrangement can benefit both buyers and sellers, provided that the agreement is properly structured. Rent-to-own contracts are usually not listed and appeal to landlords who have a long-term investment plan and are ready to execute their exit strategy for a property but not in a hurry to do so.
This option is attractive to sellers as they can sell the property at a higher than market price and earn higher monthly income for the duration of the contract. It’s a win-win situation for both parties involved if the rent-to-own agreement is structured correctly, with clear terms and a well-defined process for exercising the option to purchase the property.
The Four Parts
A rent-to-own contract or lease-option agreement becomes enforceable when it includes a written and signed lease containing four basic parts. As the buyer, you have the option to purchase the property at the end of the contract, provided you fulfill your obligations as per the agreement.
The key term for you as the buyer is “option,” which means that you have the choice to buy the property at the end of the contract or walk away. In Belleville, a typical rent-to-own agreement includes four basic parts, which we will explore below.
Purchase and Sale Agreement
In Belleville, a crucial aspect of a rent-to-own agreement is the Purchase and Sale Agreement (PSA), which is included as an exhibit to the lease. The PSA details the rights and responsibilities of both the buyer and the seller of the property and must be attached to the lease contract. Essentially, the PSA outlines the terms of the eventual sale of the property, which is an essential component of the rent-to-own agreement. It’s essential to have this agreement in place to ensure that both parties understand the terms of the deal and to avoid any confusion or misunderstandings.
Exercising the Option
In a Belleville rent-to-own agreement, a crucial aspect is the process for exercising the option outlined in the lease. An option is a financial contract that gives the holder the right to buy an asset for an agreed-upon price, without any obligation to do so. When you exercise the option, or enforce your rights as stated in the contract, it binds both the buyer and the seller to the agreement to buy and sell the property. It’s important to have a clear and specific procedure for exercising the option to avoid any confusion or disputes between the parties involved. This ensures that both parties understand their responsibilities and rights under the rent-to-own agreement.
Legal Description
The Purchase and Sale Agreement must contain a valid legal description of the property, a basic part of a Belleville rent-to-own agreement. In addition, the description must be legally sufficient for the property to be transferred or mortgaged. The street address is not the legal description for use on a deed. Land records are not the same as the property tax records, and neither may be enough for the legal description required; the description on the existing deed is the most reliable source for your description. Most importantly, ensure that the information in your description matches your source exactly, down to each letter of each word and the punctuation used originally.
Valid Consideration
Consideration is a legal term used in real estate that describes the value that will change hands as a part of an agreement, an obligation on the seller to sign and deliver the deed, and the buyer to pay the agreed-upon price. The agreement of both parties validates the agreement. The Purchase and Sale Agreement must have valid consideration as a basic part of a Belleville rent to own agreement in exchange for the property’s purchase price. Common types of consideration are money, real property, or a promise to perform some type of action.
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The pros at Cardinal Creek Properties can help you fully understand the basic parts of a Belleville rent-to-own agreement and how they benefit you. Cardinal Creek Properties can help you locate rent-to-own deals, and don’t forget to ask about our current inventory of the best rent-to-own properties available now in Belleville. Contact Cardinal Creek Properties today at (314) 467-8137!