Using Rent to Own to Get into a School District
September 14, 2017 by Marty Orefice | Real Estate, Rent to Own
The competition to get your kid into the best school is fierce. Parents want their child to attend the best school possible, and they're willing to move to do so. The district for the best elementary school might be different than the zone for the best middle school. So, just because your child was able to attend a good elementary school where you currently live does not mean middle school will be the same.
When it comes to public schools, typically, each school has an invisible border around it that stretches into the community. If you live within the border, you can attend that school. If you are outside of that border, it means you are inside another school's border, and that is the school your child is supposed to attend.
For that reason, many parents tend to move as their kids change schools. The aim is to live within the border of the best local school.
Once a parent moves, he or she needs to establish the family's residency within the border with the school and enroll the child. While every district is different, the Department of Education states that residency can typically be established with a telephone or utility bill, mortgage or lease document, parent affidavit, rent payment receipts or a copy of a money order made for payment of rent.
With only a summer to find the perfect home and close on it, the timeline to get accepted by the school is tight.
Even more so, in that time frame, you will need to be approved for a mortgage and come up with the down payment for the home you are interested in.
Additionally, if you are buying a new house, you might be in the market to sell your old one. The easiest time to sell a home has proven to be summer, meaning the sooner you are out of your current house the sooner someone else can get in.
Even if everything goes perfectly, you may end up moving past the school's deadline for accepting children. For that reason, you might be interested in renting to own a home within your child's school district.
A rent to own contract can serve as the proof of residency you need to get your child into your desired school.
How Renting to Own for School Access Works
First, find a home for sale that you are interested in purchasing. Approach the owner or realtor and confirm that you want to purchase the home; however, you want to move in before closing. Propose renting to own the property. Pay an option fee that guarantees you the option to purchase the property at any point throughout the lease. Move in. Pay rent during the time that you are living there. You can negotiate rent credits, which are kickbacks from what you pay in rent that go toward your down payment on the home. Purchase the home when you are ready. Have all rent credits you earned and the option fee you paid credited toward your down payment on the home.
This tends to work really well for properties it is going to take a while to close for. For example, if the property is in probate, if you haven't been approved for a loan yet, or if you are waiting for funds from the sale of your current home.
WHile rent to own is a great way to get you into the home quickly, it is a little-known concept. Everyone tends to have a bit of uncertainty avoidance, meaning, they are wary of trying something they haven't done before. Everyone understands traditional selling and buying. They learned it while playing Monopoly, but there is no Monopoly for rent to own.
You should start by explaining to the seller how rent to own works. Then use the following bargaining chips to convince him or her.
Lease-Purchase Contract
Through rent to own you would move into the property immediately and sign a rent to own agreement. In a situation like this, when you are certain that you want to purchase the home, you can sign a lease-option contract or a lease-purchase contract.
Normally, it is best to avoid lease-purchase contracts. Under a lease-option contract, you have the option to purchase the property before the end of the lease. Under a lease-purchase contract, you must purchase the property before the end of the lease.
Most people who are renting to own are not certain of whether they want to purchase the home they are renting to own. For that reason, signing a lease-purchase contract is usually a bad idea because they become contractually obligated to purchase.
However, if you know that you want to purchase the property, but cannot do so as soon as you want to move in, offering a lease-purchase contract to a seller might be very convincing. Especially, if the seller was not looking for someone to rent to own, and you are trying to convince him or her of the concept.
Lease-purchase contracts offer the seller a feeling of security. His or her property will be bought because the contract guarantees it.
Use a Short Lease Term
Another method of convincing the seller to agree to your rent to own proposal is offering a short lease term.
If you are set on purchasing this home and merely waiting on the resources to do so, you can sign a one-year rent to own contract. Note: This is only a good option if you think you will be ready to close within 6 months. If your contract ends and you have not purchased the home yet, you will lose your option fee.
Most people aim for long lease terms to give themselves plenty of time to close. However, if you are trying to convince a reluctant seller to let you move in, and if you will be ready to close in time, this is a great bargaining chip. The seller knows he or she will not be holding on to the asset longer than needed.
It helps give the seller comfort in using a different tactic.
Why it Helps
In the case that you can purchase a home now, you should do so. There is no need to rent to own if you can get into the home you want when you want to.
Rent to own, in this situation, is for when life gets in the way. Like in this examples:
You needed to move in by late August, and when school let out in early June that felt far away. Your family went on vacation, enjoyed some time at home and finally at the end of June or early July, you started looking for a home. The average home closes in 30 days, and you still have time. You look at properties after work. You fall in love with a few, the bank supplying you with a mortgage says they are out of your price range. You keep looking and settle on one a little cheaper. However, this house is in probate.
It's definitely the one you want. It's the right size and the right price, but now you're down to 50 days before you have to be ready for school, seats at the school are filling up and you are running out of time. That 30-day closing window is getting closer and closer and 30 days is just the average. It could take longer than 30 days.
The seller cannot sell until probate ends, and you need to get in as soon as possible. In this scenario and scenarios similar to it, renting to own would be a good idea. It's not a permanent deal, but it will get the job done. Additionally, in a situation like this, the seller would probably be very willing.
Examples like the one listed above are great opportunities to use rent to own to your advantage to get your child into the best school district possible.
Life gets in the way of purchasing a home quickly sometimes, but that doesn't mean that life should keep your child from attending the best school possible.
