After Chris Verville moved to Sarasota, Florida, for a job in 2012, he soon decided he wanted to buy a home for his growing family.
But rents in the area were rising and the list of single-family houses for lease in the region had been picked clean.
Verville could afford to buy, but he didn’t quite know what neighborhood to scout or how much to spend and still live comfortably. The father of two didn’t want to rush into what, for most people, is the largest financial decision of their lifetime.
Verville ultimately found a way to test the benefits that come with buying without the long-term commitment. He found Home Partners of America Inc.
Home Partners has launched a new program that allows interested buyers to pick their home with their own Realtor, lease it first and have the option to purchase it within five years.
The Chicago-based brokerage has rolled out its program in 34 markets, including Sarasota.
It has bought more than 225 homes in the greater Sarasota area and 4,500 nationwide.
The company hopes to offer a new path to homeownership for renters across the country.
“If you’re trying to find a place to rent, there’s not much to look at, and the options are pricey,” Verville said. “It was almost like a free look” at buying.
Not Rent to Own
Home Partners launched as a pilot in 2012 in Chicago, Dallas and Denver. The company now is buying homes in 17 states.
The program was designed for consumers who want the space and privacy of living in a single-family house but who are not ready to commit to a mortgage.
It’s different than the traditional rent-to-own option, which charges renters two prices: one amount to cover the lease and another that’s set aside for the purchase.
The Home Partners model gives buyers the option to select their own real estate agent and to shop for a house just like any other buyer would. The company uses similar metrics as Fannie Mae and Freddie Mac to determine what a buyer can afford, capping payment-to-income at 35 percent and debt-to-income at 45 percent.
The house must be in an A-rated school district and priced below $550,000.
After a client finds a home they like, they must sign at least a one-year lease with Home Partners, which then buys the house and rents it back at a pre-agreed price.
Rents automatically increase 3.75 percent annually, which equates to about $75 a month on a $2,000-a-month lease. A two-moth deposit and basic home inspection are required before move-in.
But at any time within five years after the lease expires, the client can decide to buy or walk away. The company would then sell or rent to another interested customer.
“There are a lot of people who want to try before they buy,” said Ayoub Rabah, senior vice president of marketing for Home Partners. “They are unsure what communities they want to live in and what the commutes to work will look like.”
Who It’s Good For
Rabah said the program is ideal for families with a foreclosure or short sale on their record. Many want to buy again but must wait out the penalty period before they can qualify for a new mortgage.
It also has attracted relocating families and recent retirees who are still feeling out an area, along with housing consumers who have large pets, which are not allowed in most typical rentals.
For these people, buying and quickly reselling a home can be costly.
One of the hurdles facing buyers who must quickly resell a house is closing costs, which can total thousands of dollars per transaction, eating into any equity. Most people own a house at least four to seven years.
“The beauty of it is people can buy at their own pace,” Rabah said. “The market is tight. People have to make quick decisions. The demand is strong. We give our customers the ability to think it out.
“We are focused on making homeownership a reality for more people.”
Changing His Mind
Verville was introduced to the Home Partners program through Joe Murphy, an agent with Coldwell Banker in Manatee County, who has done several deals with the company.
He ultimately picked a house in Waterlefe Golf and River Club in Bradenton, a popular Southwest Florida community. Home Partners closed on the deal for $385,000, Verville said.
But he actually found the commute to his work with an area development firm was too long — more than an hour during peak driving times.
So Verville is planning to leave after the lease expires, and the additional time helped him find a $309,000 listing farther south in Sarasota, which he is currently under contract to buy. He is planning to renovate the home’s kitchen, replace the flooring and ceiling, paint and landscape.
He said he considers the Home Partners program a success, saving him the hassle — and potential losses — of quickly re-listing a home he was poised to buy.
“It’s another tool in the toolbox,” Murphy said. “It’s not for everybody, but it’s a great option for the right kind of buyer.”
