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RENT-TO-OWN Agreements |
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As seen in 
The Maybe OptionBy VIVIAN MARINORENT-TO-OWN agreements are not especially difficult to set up. As Neil B. Garfinkel, a real estate lawyer in Manhattan, explained it, "You’re basically negotiating two deals at the same time." In a typical contract, a renter negotiates the lease and also locks in the right to buy a home at a predetermined price within a specific period, usually one to three years. The renter may be required to make a nonrefundable deposit. Rent is sometimes set above the prevailing market rates, and the excess amount is credited toward the purchase, almost like a forced savings plan. If the purchase option expires without a sale, the owner is free to sell to someone else. But in some instances, the owner or developer may be willing to renegotiate the sale price, especially if prevailing property values have declined. As with any real estate transaction, both parties need to exercise due diligence. The seller, for example, will have to determine that a renter will be qualified to buy during the option period, and the renter must ensure that a home is available for sale and not on the brink of foreclosure or encumbered by liens. "There are banks that can do a statement of prequalification based on certain things happening in, say, six months or two years," said Danielle Babb, the author of "The Accidental Landlord" (Alpha Books, 2008), which discusses these transactions. And, she said, renters "can ask the seller to provide their current mortgage statements to make sure they’re up to date." Ms. Babb recommends that both sides work with lawyers or brokers experienced in these transactions, although she points out that do-it-yourselfers can download standard lease-purchase forms from Web sites like thelpa.com , the home page for the Landlord Protection Agency, an organization for residential landlords. Apartment sellers in New York City have the added burden of making sure that they are permitted to rent their units. “You have to know the rules of the building,” said Jacky Teplitzky, a broker at Prudential Douglas Elliman. She noted that some co-ops prohibit rentals altogether while others have strict limits, typically allowing units to be rented for no more than a year. |
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