Do You Want To Become A New Homeowner Or Stop Foreclosure?

1. Do You Want To Become A New Homeowner Or Stop Foreclosure?

2. Synopsis 1. What is Rent-to-Own a Home 2. Advantages and Disadvantages of Rent to Own a Home 3. A Guide to Power of Sale or Foreclosure 4. Power of Sale: Options and Myths 5. Credit Management and New Trends

3. What is Rent-to-Own a Home • You may find rent-to-homes more often in the United States, they do show up all over in Canada also, especially in the states of Ontario, Alberta, and British Columbia where the price of housing are typically high. The main reason why these rent-to-own homes are more appealing because you can get them at affordable rates even if you are not eligible for a mortgage. The investor or homeowner will rent out a house that is on their name already, similar to the landlord of the apartment. Each of the rental income comes with a specific rental agreement that the tenant must afford if he/she wants to live there. There are two types of contracts offered in this situation “lease purchase” and “option-to-purchase.” If you choose a lease-purchase, it means you have agreed to buy the house at the end of the term. If you choose “option-to-purchase” you will sign the agreement that has the option, but it will not bound you to buy the house at the end of the term. • In most cases of rent-to-own agreement, the tenant is required to pay the “option consideration.” This is a negotiable but non-refundable deposit, which usually amounts as 3 to 5% of the homes price. The option consideration gives tenant the right, but not bound him/her to buy the house. If you don’t wish to pay for the option consideration, the house owner might still let you rent the home but it will not give you the right to purchase the home at the end of the rental period. It totally depends on the terms of the agreement, the part or full sum of money may go towards the down payment on the home, but it is also a fact that every agreement is different.

4. Advantages and Disadvantages of Rent to Own a Home Advantages or Disadvantages for Real Estate Investor • Advantages • The house is something more desirable than the average apartment, they end up in a position to charge at a high rate for rental fees. • Since a specific percentage of the monthly payment is going into the pocket of the seller, the investor will also receive a handsome profit, especially once the house is sold. • If the tenant chooses the option-to-purchase consideration, the fee of the deposit can be collected up front. If the tenant fails to purchase the home at the end of the term, they will lose their deposit to the landlord. • If the contact is made on a lease-purchase or the tenant wants to buy the property, the seller will earn from the rental and also retains the money but his house will be sold officially. • Disadvantages • Rather putting the property on the sale right away, the seller has to undergo tenant screening processes such as credit and background checks. • If the contract is made on the basis of option-to-purchase, the renter is not bound to purchase the property at the end of the term. The deal can be terminated anytime when the rental agreement expires. In this case, the seller has to find another renter and go through the screening process again.

5. Advantages and Disadvantages of Rent to Own a Home Advantages and Disadvantages for the Tenant • Advantages • If the contract is made on the basis of option-to-purchase, the tenant will be provided with the right to cancel the rental agreement at the end of the term. • If the tenant has a very poor credit score, few years of renting will provide them time to make their credit score better through other means such as credit payment on time. • If the asking price is finalised, the tenant will then pay the price for a home which does not include the rent payment at the end of the contract, even if the prices fluctuates in the market. • Disadvantages • If the credit score and the finances of the tenant not improved by the time, the rental agreement expires. He or she will not receive the necessary financing to own the house. • In some rent-to-own cases, unlike the apartment, tenants are bound to make the repairs and maintenance. They might have to pay for the association fee, insurance, and property tax also.

6. A Guide to Power of Sale or Foreclosure • Facing Power of Sale or Foreclosure in Canada • If a person receives a letter from the lender or bank threatening the power of sale or any judicial sale proceedings the first thing a person should do is to contact the lender right away. If you have a history for making your mortgage payment on a timely manner and a rare occurrence such as injury, illness, job loss has forced you to miss a few payments, the lender should be asked to work something out directly with you. • Selling the House Before the Lender Sells It • If nothing is going in your favour, it is better to sell the home by your own self. If you sell the home before the lender does, then it will not be considered as a power of sale or foreclosure and that is why will not be held against the credit. In the end, you have to pay the lender back with all the proceeds of the sale of the house. • Losing a Home in Power of Sales or Foreclosure • If someone loses the house to the power of sale or foreclosure, it will stay for six years on the credit report.

7. Power of Sale: Options and Myths • The Options Available for Homeowners • Since the power of sale can proceed quickly, any homeowner in Canada who has received a letter of power of sale should contact the lender immediately. The reason for this is, even the efficient power of sale process is time-consuming and expensive for the lender compared with the typical loan. Therefore, most of the lenders will recover their money through normal loan payment rather than the power of sale. If the homeowner makes a late payment or missed a payment the results of rare occurrence, then it is the responsibility of the lender to use an alternative payment plan that provides the best possible outcome for the lender and the homeowner. The power of sale should be avoided all the time. • In some situations, the lender may not be able to worth with the homeowner such as orphaned mortgages, where the lender is not doing the business anymore in Canada. This is fortunate for the borrower to still hold to his property even if the lender is not able or willing to work with him. The borrower needs substitute financing. Traditional financing offers the best rates only if the borrower is completely eligible.

8. Power of Sale: Options and Myths • Myths • The power of sales takes no time: This is true that the power of sales takes less time than other home sales but it does not mean that it happens overnight. There are still much paperwork and legalities that should be completed before you take the property ownership. • The deal is final: It is one of the biggest myths about the power of sale. If specified in the agreement of purchase, the lender or bank has the right to cancel the deal anytime, if the power of sale owner of the property catches up on the payment of mortgage before the deal closes. It is your duty to consult a lawyer before signing the agreement of purchase and make a clause that the deal must go through even if the property owner is able to make their mortgage payments again. • Properties sold under market value: When it comes to the power of sale properties, it may seem like a very good deal but in fact, they are sold as per their worth and not under the market value.

9. Credit Management and New Trends • Reactive to Preventive • The proactive credit managers do not wait for the things to get out of hand. They know where to find the opportunities and acts according to it. It is very important to pre-screen you customers with efficient and effective due diligence methods. The focus on prevention will let you detect any payment problems in advance. • Standard to Tailored Service • Companies also acts like customers, they always want tailored services rather than a standard solution. The trend is not shifting as the companies are now moving towards a bespoke approach rather staying with the standardisation. However, drawing up a clear policy on any deviations from the standard terms so that both the parties can understand what to expect. It is also necessary to pursue prompt payment to achieve a higher turnover.

10. Credit Management and New Trends • Collaboration is Necessary • For credit management purposes it is important not to works with the sales teams only, but finance and marketing should also collaborate. Clear communication about the credit requirements with marketing colleague or with prospect companies is now becoming a new trend. • All about Data • Improving processes, preventing fraud, staying ahead of the competition all a company wants. Data analyses provide a wide range of possibilities, the reason to use big data is pinpointing the exact information that is relevant to the company and how the company can analyse it more effectively. • Value Management • The credit manager has a limited number of tools and sources to serve every customer in the best way to generate a good level of profit. It is now becoming important to have a watertight policy regarding the kind of customer the company wants to work with in order to protect the business.

11. For more details, please visit: https://homeownersoon.com/rent-to-own-program/ HOS FINANCIAL INC. Toll Free: 1(800)670-2756 Fax: 1(800)294-0637