Expert: Karyn Foley - 6/27/2008

Question
I want to sell my house by renting to own.  Do I need legal forms and who or where do I go to get them, and is the new renter liable for getting home owners insurance?

Answer
Dear Wendy: I am not certain what you mean by "renting to own".  Here, in California, we might call it as a Lease Option or a Lease Purchase, where it is rented prior to the leasee making the actual purchase.  If this is what you are considering, please understand that these processes are fraught with potential problems.  You are going to be held accountable for many issues, which is why, even as a broker, I insist on having the transaction quarterbacked by a real estate estate attorney.  There are too many misunderstandings that arise coming from the disposition of the deposit, how much (if any) of the rental money applies towards the deposit or down payment when the purchase is made, and so forth.  Also, what happens if the agreed upon purchase price becomes unreasonable at time of purchase?  If the home is worth less, what could happen?  If the home is worth more, what could happen?  Even if you rent your home just as a simple rental, you should carry insurance.  Your lender will even require it, and it could be dangerous without it, say in the event of a fire or flood.  The tenant should carry insurance for the tenant's belongs and personal stuff.  You could probably get forms off of the internet, or a stationery store who sells legal forms.  There are good agents who could represent you, handle the forms, the proper wording, the mandatory disclosures, etc.  Also, do the required advertising and support systems during the rental and/or sales period.  Or, get an attorney.  A simple rental is just that, many times simple, or what you want to do is too complex in this litigous society.  You will be spending a few dollars for representation compared to losing many dollars for a deal that could easily go bad.  Let me know what you do, and if I can help with any more questions.  For legal information, go to a local storefront legal aid office that could do it less than a more formal, professional attorney.  But saving money is not what this is all about.  You get what you pay for, so be circumspect and go with the best.  Karyn Foley