Why Would an Agent Get Involved with Rent to Own?

By
Real Estate Agent with RentToOwnLabs.com

Typically, real estate agents don’t want anything to do with rent to own. It’s not really a rental property and it’s not a guaranteed sale. Therefore, the commission is up in the air.

So, why would a real estate agent want to get involved in rent to own?

Commission

Commission potential is significant if you’re not afraid of confrontation. From one deal, you can earn commission from a rental and commission from a sale.

Prior to working with a rent to own buyer or seller, you have to determine how you will get paid. How much commission will you earn from rent? Will it be a percentage of rent for the whole year or a percentage of the first month’s rent? Is the seller obligated to pay you a commission if the rent to own deal is successful? Do you earn a commission from the option fee if the deal is not successful?

Like I said, there’s not really a protocol for rent to own commissions. You cannot assume that you and your client are on the same page until you write the commission down on a page and sign on the dotted line.

Negotiate a commission on the rental and on the sale of the home. It’s in the seller’s best interest to compensate you for both. Finding a tenant for a property is easy, but qualifying that tenant to predict whether they will qualify for a mortgage is much more difficult. Therefore, if the seller isn’t giving you a commission on the eventual sale of the property, then there’s no reason – other than ethics – for you to do the work of qualifying that tenant.

Future Deals

If someone is selling their home, chances are they’re also looking to buy a home too. You’re already aiming to make a commission off the rental and sale parts of the seller’s rent to own deal. Helping the seller to purchase their next home could result in a third layer of commission.

Twenty-three percent of home buyers use an agent they’ve previously worked with when they need to buy or sell a home, according to the National Association of Realtors’ Quick Real Estate Statistics. Therefore, by working on this rent to own deal, you’re increasing client relationships.

By increasing your client relationships, you’re also spreading the word about your business. The same list of statistics from the 2017 Profile of Home Buyers and Sellers states that 41 percent of sellers who used real estate agents found them through a referral by a friend or a family member.

Creating a positive relationship with this rent to own client could earn you the commission from a sale in the future. That’s especially true because not a lot of agents want to work with lease-option deals. Therefore, when the seller finally finds you, a willing helper, they will be much more appreciative of the time you dedicate to them.

Confidence in Your Ability

The primary fear that agents have about rent to own is that the sale of the home isn’t guaranteed. Therefore, the profit at the end isn’t guaranteed.

However, if you do your due diligence on the buyer’s finances, you’ll have a good idea about whether they will qualify for a mortgage for this home within the lease term.

If you learn that buyer’s interests – just like you would in any normal sale – and do your due diligence, you’ll know that the property they’re in is the right one for them. That eliminates a lot of the uncertainty about whether the buyer will purchase at the end of the lease.

Of course, there is no way to completely eliminate uncertainty. Nonetheless, there’s no certainty in real estate until the ink has dried. People purchasing houses through traditional routes walk away all the time.

Should You Work With Rent to Own Deals?

I’d recommend working with rent to own buyers and sellers when the opportunity presents itself. The deals have the potential to be lucrative if you’ve done a good job at setting them up.

More so, many agents avoid lease-options. If you’re short on prospects, there isn’t a lot of competition for these. Plus, the market of clients expands because there’s a large group of people who are two or three years away from purchasing a home that you can tap into before your competition is even considering them.

 

Featured image from Pixabay

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Rainmaker
419,856
Jeffrey Masich- Arizona Associate Broker,MBA &GRI
HomeSmart Real Estate - Scottsdale, AZ
Arizona Homes and Land Group/ Buy or Sell

Good points from a Realtor's perspective Martin Orefice and welcome to the Rain. Most buyers on rent to own are not qualified and are hoping for a home. What they do not realize is many of these homes are not the greatest homes and they fall out of love with them. Otherwise if they were ok and priced right the homes would sell. If the seller is considering a rent to own the Seller is usually going to take a portion of the rent to apply to a future purchase. However, the usual caveat is at the "then future market price". This does not do much for a buyer. They are not locked in on a future market price. If they do not buy in the future at the unknow price they have lost the extra the Seller/Landlord took in rent. They often would be better off to rent at the best price possible anywhere, put their extra cash away in a savings account or pay off debts to qualify for a mortgage faster. Then when they are qualified to buy they can negotiate for the best price on a home at that time. Rent to owns normally do just not work, except maybe for the Seller.

Mar 28, 2018 10:51 AM #1
Rainmaker
3,549,307
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

I have yet to see. A good rent to own contract.  Not one

Mar 28, 2018 11:10 AM #2
Rainmaker
726,289
Mel Ahrens, MBA, Kelly Right Real Estate
Kelly Right Real Estate - Hood River, OR
Customized Choices for your Real Estate Needs

Welcome to Active Rain, a great place to share, learn and network. I have done a couple of lease options; worked out fine. Another one did not work out for the buyer as their work situation changed, which meant moving.

Mar 28, 2018 02:36 PM #3
Rainmaker
3,954,205
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Welcome to active rain. Good luck in achieving your goals 

Mar 28, 2018 05:12 PM #4
Rainmaker
916,725
Carol Williams
U.S.: I specialize in helping agents who have been in the business 2 years or less create a thriving business. - Wenatchee, WA
"Customized Mentoring & Marketing Services"

Hi Martin,
Done properly, rent-to-own can be a good option for both buyer and seller.  I did many over the years.

Welcome to ActiveRain.  We love sharing our professional experience and learning from each other. Blogging is a very effective way to establish you as a local expert.  

Keep Blogging! 

Mar 28, 2018 06:28 PM #5
Ambassador
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Martin Orefice welcome to ActiveRain and congratulations on successfully posting your first blog on this site.

Mar 30, 2018 03:38 PM #6
Rainmaker
1,328,103
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Los Angeles CA

Martin, 

in my area we almost do not have them. 

 

Welcome to the Active Rain community. Congratulations on your first blog post! 

Mar 30, 2018 05:43 PM #7
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams fox cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Interesting points Martin, I would be interested in looking further into this.

 

May 19, 2018 08:27 PM #8
Ambassador
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams fox cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Welcome to Active Rain, looking forward to reading many more of your posts, let me know if there is anything that I can do to help as you get started here.
All the best of success to you.
Bob

May 19, 2018 08:27 PM #9
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