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For Sale By Owner: Rent-to-Own Properties

If you have bad credit or are otherwise unable to obtain an actual home loan, there are many “For Sale By Owner” houses that could peak your interest. These FSBO properties usually entail payment directly to the owner until a predetermined amount is paid off. There are a variety of ways you can do this all of which should include a contract to purchase the lot. How do these FSBO properties differ from paying a mortgage to a bank?

property apartment
property apartment

1. Understanding –¬†Historically, those who sell their homes themselves are more understanding to dire circumstances than banks are. If you are laid-off or are otherwise unable to work, the bank doesn’t really care. They may have payment plans and options to help you, but the bank is in the business of money. Private sellers may devise a plan to help you get back on your feet, and many of them will be more lenient about payment scheduling. However, this doesn’t mean you can live in the house for free. Eventually, the property owner will exercise his or her right to evict you if you don’t show some kind of effort.

2. Escape Plans –¬†Private property owners are more inclined to develop an “escape plan” into the contract of the property. These plans usually consist of a clause that allows a person to be able to back out of buying the property should he or she not be able to pay for the home. Essentially, this just turns the experience into a rental and the owner looks for another buyer. In essence, it’s much like a rent-to-own situation where you are renting an item with the option to keep paying until the total amount is covered, at which point it becomes yours. However, if you continue to pay for a property and move out three months before it is completely paid off, then you no longer have rights to it and the owner can “sell” the home to someone else.

3. Insurance¬†In most situations, banks will demand an insurance policy be upon the property in the event of damage. Some private owners will have his or her own home owner’s insurance policy that covers the lot that you may or may not be responsible for in paying. This is entirely up to how the owner has the property set up. In any event, it is always best to have insurance on your property to help pay for repairs should the wind knock down a tree onto your home or a flood destroys the base of your walls. If the owner of the property does have an insurance plan, make sure you know what is covered in case of emergencies.

There are many aspects to buying a home that you need to be aware of whether you are using a bank loan or not. Always get as much detail about the responsibilities and the management of the property in a contract in order to reduce the risks. Most honest FSBO sellers will have detailed contracts regarding the property that both parties can be secure with. If you are ever in any doubt about the legality of a private contract to purchase property, it may be in your best interest to seek council to determine if the contract is in fact legal.

This article is contributed by Madoline Hatter. Madoline is a freelance writer and blog junkie from You can reach her at: m.hatter12 @ gmail. com.

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