[stineaac]

What is the difference? As a seller, should we consider one of these? Is it risky to agree to either of these? Thanks in advance for your expertise!

[rockinmommy]

These are options to consider if you cannot obtain traditional financing due to bad credit.

Lease-to-Own, or Lease with the Option to Buy can work a variety of ways, but basically you lease the property from the owner. You typically pay a higher rate of rent than you normally would for the same house because a portion of your payment is going towards a down payment on the house. You are also normally asked to pay a larger deposit. Often with Lease-to-Own it's non-refundable. In addition to the lease, you also sign an "Option" contract. It basically states that you have the option to putchase that house for a set, pre-determined price, within a set number of months or years. If you don't exercise your option, then at the end all of the money normally ends up with the landlord/owner.

Owner Financing is where you purchase the house, but instead of obtaining a loan from an outside source, the owner of the home "carries" the note for you. Typically you'll pay a much higher rate of interest, and typically the purchase price of the house will be higher than if you were to just buy it outright. Most owners require a sizeable down payment. If at any time you default on the payments they can foreclose on you and regain ownership of the house. Then they'll start the process all over again.

Many property investors who sell and/or lease houses using these methods are banking on the fact that the buyers are not going to follow through and actually wind up purchasing the property. They will sell the same house over and over again, collecting that large down payment each time.

If you can't obtain a traditional mortgage, and follow through with the process - eventually getting a mortgage and paying off the owner (maybe once you've had a chance to repair your credit, etc) it can be a do-able deal. Just know that you'll pay more. For some still better than just renting.

If your plans are somewhat up in the air. Not sure where you want to wind up. Not sure about future job prospects. Not sure you can repair your credit and eventually get traditional financing, etc... may be better to just rent.

I do a lot of property investing, but have never been able to reconcile myself to selling property using these methods.

GREAT deal for the owner, so-so deal (at best) for buyer.

HTH