Most Common Purchase Types


There are multiple ways to end up 'buying' a home. Traditional ways and somewhat creative ways as with owner financing.

However, it's not like you see on TV. No one is going to sell you their property without certain criteria being met.

Free Property Listings 		There are literally dozens of ways to purchase property. Some you have heard of others, probably not. What is important is the fact that there are many more benefits to owning rather than renting. Below are the four most common types of purchase methods used today.

Keep in mind that nowadays no matter how you plan on buying (even rent with option) you must have some type of downpayment, credit scores of 625 or higher and steady income.

Standard Sale:
A 'straight forward' purchase where the buyer obtains a loan and the property is transferred at a 'closing'. This the most common transfer of property. Usually this includes a mortgage debt to a lender but, sometimes may involve 'cash'.

Rent with Option:
A Buyer fronts (puts down) money (usually 2%-4% of the price) for the 'option' to purchase the property in the near future (usually 1-3 years). The Buyer essentially 'rents' until that time. The Buyer has the option of purchasing at the end, or anytime during the term of lease. If the buyer does not execute his option the seller retains the front money. The purchase price is usually agreed upon in the beginning but, sometimes settled by an appraisal near the end of the term.

Lease Purchase:
Buyer fronts money (usually 2%-4% of the price) for the purchase the property in the near future (usually 1-3 years) and essentially rents until that time for a higher than market rental rate with the difference (say 20% of each monthly payment) being applied to the purchase price. This builds some equity in the property. The Buyer must perform at the end of the term or, is essentially in default. The purchase price is agreed upon in the beginning.

Contract For Deed (Articles of Agreement):
In what is essentially temporary owner financing a Contract For Deed sale gives the buyer an opportunity to purchase if they 'just miss' qualifying for a standard sale with traditional financing. In this scenario the buyer usually fronts 3-10% of the price for the purchase. There are essentially two closings. In the first closing there is a statement indicating transfer of funds. In addition, usually title is pulled and retained by one of the parties attorneys. The buyer owns the property and pays the Seller who continues to pay his lender. In the near future (usually 12-24 months) the Buyer refinances with a conventional lender and pays off the Seller. Because the Buyer has Equitable Title he can paint, add a deck even sell the property as long as he pays off the Seller.

The most important part to note in scenarios 2 and 3 the Seller is still responsible for the larger maintenance of the home (ie roof, mechanicals, etc) and retains the tax breaks.

In the Contract for Deed scenario the Seller no longer has to worry about a 'tenant'. The overall maintenance of the property is the Buyers responsibility. More importantly, the Buyer gets all the tax breaks and benefits of appreciation.

In every scenario you need to have decent credit and have steady reliable income.