Rent-to-own agreements can open the door to homeownership for buyers who would otherwise be waiting years to correct credit issues or save towards their down payment to qualify for a mortgage loan. This arrangement can be a win-win situation for both buyers and sellers with a properly structured agreement. Typically not found listed, rent-to-own contracts appeal to forward-thinking landlords, following their investment plan, who are ready to enact their exit strategy for a property but aren’t necessarily in a hurry to do so. This option is appealing to sellers as they can sell at a higher than market price and earn higher monthly income for the contract duration.
The Four Parts
A written and executed signed lease containing the four basic parts outlined below is an enforceable rent-to-own contract or lease-option agreement. With a rent to own agreement, the seller must sell you the property for the agreed-upon terms, given you have fulfilled your part of the agreement.
For you as the buyer, the optimum word is an option, meaning at the end of the contract, you can choose to purchase the property or cut your losses and move on. Read on as we explore four basic parts of a New York, New Jersey, Pennsylvania, Ohio & Delaware rent-to-own agreement.
Purchase and Sale Agreement
A fundamental part of a New York, New Jersey, Pennsylvania, Ohio & Delaware rent to own agreement is the completed Purchase and Sale Agreement (PSA) as an exhibit to the lease; this outlines the rights and obligations of the buyer and the seller of the asset and must be attached to the lease contract.
Exercising the Option
Another basic part of a New York, New Jersey, Pennsylvania, Ohio & Delaware rent-to-own agreement is a specific procedure to exercise the option stated in the lease. Options are financial contracts that give the holder rights to purchase an asset for the agreed-upon price without obligation. Exercising the option or enforcing your rights under the contract terms binds both parties to buying and selling the property.
The Purchase and Sale Agreement must contain a valid legal description of the property, a basic part of a New York, New Jersey, Pennsylvania, Ohio & Delaware 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.
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 New York, New Jersey, Pennsylvania, Ohio & Delaware 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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