Q: Can I offer a tenant the amount of money needed to get a home sales ready as a down payment toward buying the home?
My rental property needs about $20k worth of work to get it sales ready. I want to do everything possible to not displace the family who are renting, so I intend to offer them $20k at closing for them to use toward a down payment. Is this transaction legal in the state of Illinois?
A:
It is generally legal in Illinois for a landlord to offer a tenant financial assistance toward the purchase of the home they are currently renting. This type of transaction is sometimes referred to as a "lease-to-own" or "rent-to-own" agreement.
However, there are a few things to consider:
1. Make sure the terms of the agreement are clearly outlined in a written contract, including the amount of money being provided, the conditions under which it is being provided, and the timeline for the tenant to purchase the home.
2. Consult with a local real estate attorney to ensure that the agreement complies with all applicable state and local laws, and to help draft the necessary legal documents.
3. Be aware that if the tenant ultimately decides not to purchase the home, or is unable to secure financing, you may not be able to recover the $20,000 you provided unless this is stipulated in the agreement.
4. If the tenant does purchase the home, the $20,000 would typically be credited toward their down payment and/or closing costs at the time of the sale.
5. Keep in mind that if the home doesn't appraise for the sale price plus the $20,000 you've provided, the tenant may have difficulty securing financing.
While your intentions are admirable, it's important to carefully consider the potential risks and to have a well-drafted legal agreement in place. Consulting with a real estate attorney familiar with Illinois law is highly recommended.
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