Wendy Patton explains rent to own - appraisal versus sale price

Any real estate investor, home owner or home buyer that does a rent to own deal needs to understand the process involving the appraisal of a lease option home when it comes time for the end buyer to purchase. The purchase pice is agreed upon at the onset of the rent to own. Because the sale of a rent to own home takes place over time the home may go up or down in value by the time the end buyer is ready to purchase their lease option home. When it comes time to buy the rent to own home the buyer's lender orders an appraisal. Three things can happen with that appraisal.

1. The lease option property appraises for the amount of the agreed upon purchase price. If this is the case everything can proceed forward without problem for the real estate investor, the home seller and the home buyer.



2. The rent to own home appraises for MORE than the amount of the agreed upon purchase price. In this case as long as the buyer has lived up to all of their obligations in the option contract, the home seller or the real estate investor MUST sell for the agreed upon purchase price. The buyer benefits from the extra equity.



3. The lease option home appraises for LESS than the amount of the agreed upon sales price. Of course we hate to see this happen, but sometimes if real estate markets are in decline it can. If this is the case, the home owner and the real estate investor are only obligated to sell for the original sales price. The buyer wouldn't be able to qualify for a mortgage at that price so the deal would fall apart. While the home owner or the real estate investor are not required to sell the rent to own home for a lower price they may choose to. Let's face it, the home has gone down in value, so they won't be able to sell it to anyone else for more. They may want to drop the price to the appraised value so the buyer can complete the sale.

These terms are part of the lease option contracts that are so important when doing a rent to own sale. I explain them in great detail in my books, Rent to Buy, and Rent to Sell.

Also, take a look at this video where I talk about the appraisal versus sale price.