Carolina Home Partners, LLC


Purchasing a home: Rent to Own / Lease Purchase Q: What is the difference between Rent to Own and Lease Option? A: The terms "Rent to Own" and "Lease Option" are often used interchangably. For the purposes of purchasing a home they are generaly the same. Q: What is a contract? A: A contract is an agreement between two or more persons (individuals, businesses, organizations or governments agencies) to do, or not do, a particular thing in exchange for something of value. Q: What is a lease option contract? A: A lease option contract is a basic lease contract with a separate option-to-purchase contract. The tenant/buyer pays to the landlord/seller a non-refundable option consideration that is applied to the purchase price of the home. The tenant/buyer then pays to the landlord/seller rent to compensate the landlord/seller for the use of the property. Rent payments are made on a month to month basis. A portion of that monthly payment is often applied to the purchase price and/or down payment of the home. During the term of the lease, but before the option expires, the tenant/buyer has the exclusive right to buy the home under the terms to which both parties have previously agreed. Lease + Option to buy = Lease/Option Agreement Q: How much option money will I need? A: That depends on your monthly payment and the price of the home. Generally it will be 3-5% of the purchase price. Q: Why should I pay option consideration when I can just rent by paying a security deposit and get it back when I move? A: When you rent, your rent money is not working for you, it just disappears month after month. The option consideration allows you to move toward the purchase of the home while still keeping your payments affordable. Q: What if I decide I don't want to buy the property? A: You are not required to exercise the purchase option; however, the option consideration and any rent credits earned are NOT REFUNDABLE should you decide not to buy. Q: What if I need more time before buying at the end of the term? A: In certain cases, it might be possible to renew the lease for another term. This would require a payment of additional, non-refundable funds and could require that the purchase price be renegotiated. Q: What about utilities, property taxes and home owner's insurance? A: All utilities are the responsibility of the tenant/buyer. Until you purchase, all taxes are paid by the seller. In addition, we will maintain insurance on the structure and grounds but you will be required to purchase renter's insurance to protect the contents. Q: What about maintenance? A: The tenant/buyer is generally responsible for up keeping and repairs. Q: Where can I get more information? A: If you have additional questions not answered here, please feel free to contact us. Return to top... Purchasing a home: Contract for Deed A contract for deed is an agreement where the buyer makes payments on a home similar to auto financing. The seller holds legal title to the property as security for payment while the buyer has "equitable" title. When the buyer pays the full amount due under the contract, the seller hands over legal title to the buyer. Equitable title gives the buyer the right to live in the property, improve it, rent it and enjoy all of the benefits of ownership; however, since the buyer does not have legal title, he cannot use it as collateral for a home equity loan (state dependant). A contract for deed is generally treated as a sale by the IRS which means the buyer has the tax benefits of ownership thus the payments of interest that are made by the buyer are deductible as "mortgage interest", even though the buyer does not have legal title to the property. If the buyer defaults on the contract and the seller exercises his option to reclaim the property, the tax code treats the transaction as a foreclosure. Q: How much down payment will I need? A: Generally 10% of the purchase price. Q: Over what period of time is the contract amortorized? A: Generally there is a 15 or 30 year amortization schedule associated with the contract. This provides flexibility in the monthly payment. Q: When will the contract be complete? A: Each contract is unique. There is generally a balloon payment associated with the contract. At that time the property could be refinanced or paid in full. Q: Where can I get more information? A: If you have additional questions not answered here, please feel free to contact us. Return to top...


Here are the answers to the most frequently asked questions abou the services that we offer. Purchasing a home: Rent to Own Lease Option Contract for Deed