Renters,

Basically, most people would rather own a home than rent one.., but most simply cannot come up with the needed credit scores and/or down payment needed. However, there is an alternative. Lease or Rent-to-Own options. We will discuss the two most common programs that we offer, however there are a wide variation of different contracts and some people make very strange deals with other people they hardly know that can and often do cause them harm in the end. So we try to keep it as simple as possible.

Disclosure: Please be aware that we at BCI Properties, LLC does represent the best interests of our clients, the home owners. We will always be honest in all our dealings with owners and tenants, being fully aware of the Washington State Landlord Tenant Law. You should have all legal, lease, rental, purchase and sale agreements etc reviewed by an Attorney. We can recommend several in the area if you wish, or you may choose to call on our own Attorney Martin Burns of Tacoma, who is a partner at Attorney's Title.

Basically, most people would rather own a home than rent one.., but most simply cannot come up with the needed credit scores and/or down payment needed. However, there is an alternative. Lease or Rent-to-Own options. We will discuss the two most common programs that we offer, however there are a wide variation of different contracts and some people make very strange deals with other people they hardly know that can and often do cause them harm in the end. So we try to keep it as simple as possible.

A Lease or rent to own home is where you you may also control the property by having the option to purchase it at any time during your lease period for a fixed pre-determined price and time period. Once a Lease Option Contract is signed around and mutually agreed on, neither the owner nor their Agent can market or sell the home to anyone else, since they are bound by their agreement to give you a Lease/Option right to occupy and buy. If you do not buy the home within the prescribed period set into the contracts, all bets are off and the deal is then null and void. Always make sure that the Property Manager or Seller/owner files your option to buy agreement with the county recorders office that the home is in, especially in Washington State if the Lease/Option is over 12 months. This will protect you further in most cases. - The assumption is that a buyer lacks the good credit or down payment needed to just purchase a home of their choice, which makes this type of option a possibly good alternative.

Two Optional Rent-to-Own Plans*

1. Rent to Own Basic No Fee Option -

A simple rental agreement with a basic statement in it or attached as an Addendum, which allows you the "right of first refusal" or "option to buy" the home for a pre-set amount of time and on some rentals we can even negotiate for a pre-set price. Options are set for the term of the lease or one year. No extra money down by the renter, just pay normal rent. You must come up with what ever is required by your lender for a down payment, appraisal costs, Escrow fees and other closing costs in the end of course. Closing costs for a buyer seem to average about 3% to 5%. For lender or Bank help, contact Ben Leske my son the local Home Loan Lender. He can help with the Home Loan process in terms of what to do next. See logo and phone number to the left above.

Can you afford option money? The option money or option fee is required for a lease option contract to be valid, so this example of a "simple no-fee option" does NOT bind the buyer or seller to a sales agreement. This upfront payment may be quite small (equal to one or two month's rent, for example), or it may be 3-5% of the purchase price. All of this money should go toward the purchase price or down payment on the home if you decide to buy the house at the end of the lease term, but unlike a security deposit, you don't get the option money back at the end of the lease if you can't purchase the house or decide not to. - The idea of a "Basic simple No Fee Option" is that the tenant/renter at least knows that the owner/seller will sell to them, if all other terms such as financing is mutually acceptable. *More details and terms apply.

2. Rent to Own Fee Option with Lease Contract + Purchase and Sale Agreement -

1st, you must Understand Option Agreements.

Definition: An option agreement is a contract between a seller of a property and a potential buyer of that property, where consideration or a fee is paid by the tenant/buyer to the seller, which gives the prospective buyer the right to buy the property, typically at a fixed price, within a certain preset period of time.

The owner of the property, who grants an option to a potential buyer, receives a fee in "consideration" or return for giving the right of the option to the potential buyer. The potential buyer has no obligation to the seller until they decide whether they are going to exercise their option to purchase the property or allow their option to expire. The only person who can enforce an option is the potential buyer, however the consideration Option Fee is non-refundable..

An option is really not a sale contract, but an Addendum. At the time the option agreement is entered into between the seller and the potential buyer, the seller has not sold their property and the potential buyer has not purchased the property. There is merely an agreement that the potential buyer has the right to buy, and if the potential buyer chooses to exercise that right or not. If the Option is exercised, then the owner is obligated to sell.

Since the option agreement is a contract giving a potential buyer, the right to buy the property at a fixed price within a certain period of time, it is important that the contract spell out the exact terms and conditions of the eventual purchase.

There are two parts to such an agreement*: *Notice & Disclaimer: I am not an Attorney. These are examples only and may not be valid under all States Laws and regulations. Please be aware that there are many types of such agreements, this is just one example. Owners and tenant/buyers are directed to have a qualified Real Estate Attorney review any such agreements before signing or obligating themselves.

A. The first part is a standard lease that spells out the monthly rent with terms, and other standard lease terms.

B. The second part is the Option Addendum, although the parties to the agreement could attach a Real Estate Purchase & Sale Contract to the Lease as a "rider" option that must be exercised to be valid. A good mutual agreement binds the Seller to sell to the buyer at an agreed upon price within a specific time period, and typically has some kind of agreed upon non-refundable fee which can be applied to the purchase price or can be part of the down payment if the option is taken, or it can be a simple fee for consideration. This is why it is very important to spell out and agree to specific terms if consideration monies are paid. The Seller/owner has to sell your home to you when you want to buy it (during the option term), and generally it is for a "Locked in price", but you don't have to buy if you don't want to. That is why it has a non-refundable fee. You can back out of the agreement, but you would loose your fee.

The lease option has a fixed period after which it expires. The term is typically one to five years and is negotiated between you and the Seller/owner, who often times will hire an Attorney or a Licensed Real Estate Broker/Agent. In Washington State, Licensed Property Managers must also be Licensed Real Estate Agents or Brokers, working under a Legal Real Estate Brokerage. To secure the option, an Option Fee for consideration is normally necessary. This is known as "Option Consideration". This consideration is compensation to the owner for taking the property off the market and to guarantee a future price to you which is generally based on today's values.

This is generally good for a buyer as a fixed sale price can result in instant equity when the option is exercised. This is also good for the seller as they get their home sold. - A safety catch for the buyer is that their lender must do an appraisal at the time of purchase and prior to closing at Escrow. If the property does not appraise for the amount of the sale price, then the buyer can typically back out of the deal or re-negotiate with the seller for a further reduction of the sale price.

BUT NOTE; buyers will typically NOT GET THEIR OPTION FEE BACK even if the property does not appraise for the amount agreed upon as the option fee was for consideration or services rendered by the owner for loss of his/her rights to sell for the prescribed time and the price was agreed upon whether its a cash sale or financed. To get a sizeable Option Fee back if the home does not appraise and you cannot finance it.., BUYERS MUST HAVE IT IN WRITING.

The seller can also back out of the agreement if the buyer officially asks the seller to reduce the price, which is then a "Counter Offer" and gives the seller a right to get out of the deal. The Lease to own option consideration is not always applied to the purchase price, but it can be applied as a reduction of the purchase price at the time you decide to buy..., or it can also be counted as a down payment instead in order to help you qualify for a loan. GET THIS IN WRITING, ask questions, DO NOT SIGN ANYTHING THAT YOU DO NOT FULLY UNDERSTAND.

Your Property Manager & Managing Broker at BCI Properties, LLC can help you with finding a suitable home loan lender. We also act as a Dual Agent in such a sale with a big discount to the seller/owner, generally just 1.9% total real estate fees to the owner instead of the typical 6% an owner would normally pay. We will use Attorney's Title and Escrow services, who will ensure clear title and review all the documents to make sure all forms meet their standards and nothing is missed. Buyers may also want to have all documents reviewed by a Real Estate Attorney, such as Martin Burns ATT at Law who may charge $250 on average for such a review.

If you decide not to purchase the property, the option consideration is not refunded, as it is normally written into the agreement as a non-refundable Option Fee. It is kept as compensation by the owner for "consideration" in guaranteeing the price to you for a fixed period of time and for holding this property off the market. Your intent should therefore always be to buy the home once you enter into a rent to own agreement. The option consideration is typically up to 5% of the agreed upon purchase price and is negotiated up front.

You could also ask for a rent credit. This is beneficial for both the Seller and the Tenant/Buyer. You agree to pay slightly higher than market rent, in exchange for receiving a percentage credit to the purchase price for every rent payment made on time. Eg. Let's say market rent for a specific home is $1,400. You agree to pay $1,600 a month in rent, which is $200 extra...., but in return you receive a $400 a month rent credit if you paid on time. If you leased for one year, you would have accumulated $400x12 = $4,800 in rent credits, which can then be applied to your down payment and will reduce your purchase price even further. In other words, a portion of your rent is saved towards the purchase of your home, instead of losing the entire amount to the landlord. However this may not be part of every lease and you must ask for this concession, the owner may or may not agree to that provision. You would be paying an extra $200 a month but the owner/seller would match it ..... thus a good move for you to make.

Requirements* typically include:
Along with a Lease/rental contract we will need a written Purchase and Sales Agreement to be executed and fulfilled by end of the Lease and you may be able to "Lock in" the price while the original owner will remain on the deed until you have taken your option to buy, as you are still renting or Leasing and only have an "Option" to buy. Any Lease or rental contract that exceeds 12 months or 1 year, must be officially acknowledged or Notarized and should be recorded by the Pierce County Washington Auditors Office... if your home is in that area. You need to have:

1. A qualified job, meaning that you have been on a job at least a year and its full time or that your co-buyer or spouse also qualifies.
2. No evictions on your records.
3. Enough cash to pay 1st + Last months rent + deposit. Depending on the plan chosen, deposits vary.
4. Willing to pay a $35 basic or $75 full, credit check fee.

On the good side:
A. If you are happy with your home, you can buy it at yesterdays prices because our BCI PROPERTIES contract protected you by "Locking in" the original sale price when we first negotiated the Lease/Purchase contract. You paid for that privilege with your non-refundable deposit.

B. You may take your option at that time and finalize the purchase of your new home. BCI Properties, LLC can assist you with finding a lender with suitable rates to make it a smooth process. You should have all legal contracts reviewed by a competent Real Estate Attorney.

C. If you have a non-refundable deposit, it can be used as part of your down payment. Financing a home can be tough these days and money is tight, even good credit scores may not help when your lender requires a down payment that you may not have, so you can Lease-to-Own with a non-refundable deposit or you can negotiate to have a part of your monthly rent applied or credited toward your down payment. When you exercise your option to purchase however after a year or two, your lender may tell you that your loan could possibly be treated as a refinance using the appraised value of the home. Ask your lender today.

On the bad side. What can go wrong?
A. You may not be able to get your credit score to come up within 12 months and the owner may not want to re-negotiate your Lease/Contract or may want a lot more for the rent/lease. Ask us to write into the lease contract an automatic 2nd year lease/rent if needed with no more than a 8% raise in rent... as an example. This is not in the normal lease and it will not be available to you if you do not ask for it. Some owners may refuse up front but many more will cooperate.

B. You may not like the current finance rates or plans offered to you when you are finally ready to buy and exercise your option to purchase. Do not allow your Lease contract to expire before you decide what to do.

C. You may have poor credit, no money down... and/or no job. There is not much we can do for someone who has all three strikes against him/her except to encourage you to save your money, improve your credit score by paying your bills... and/or get a job. If its just poor credit but you can come up with the money to put down, we may be able to help. If you have good credit but just no money down.., we can probably help. If you have no job or source of regular documented income... well, not much we can do about that.

D. If you paid extra money down or a non-refundable deposit and allow your rental lease to expire before you execute a Purchase and Sale Agreement you can and probably will loose that money.

For lender or Bank help, contact Ben Leske my son the local Home Loan Lender. He can help with the Home Loan process in terms of what to do next. See logo and phone number to the left above.

HOME OWNERS - do you have a home that you want to sell on a Rent to Own basis? Please Click Here.

*Notice & Disclaimer: I am not an Attorney. These are examples only and may not be valid under all States Laws and regulations. Please be aware that there are many types of such agreements, this is just one example. Owners and tenant/buyers are directed to have a qualified Real Estate Attorney review any such agreements before signing or obligating themselves.

Donald J. Leske II / Broker & Property Manager
Emily Leske / Licensed RE Agent & Property Manager
Amber Prentice / Office Manager & Lease Coordinator

BCI Properties, LLC
10909 Portland Ave., Suite-P, Tacoma, WA 98445
Office: (253) 531-1010 | Don's Cell: (253) 241-6695
Fax: (253) 531.5358