If they don’t like the home or can’t meet one of the contract stipulations like a down payment, they walk away from the home.  If they buy the house, they will do so at a price set in the original contract.  The buyer will assume the mortgage and will also get their rental payments put towards equity in the property.  If they walk away, they lose all their monthly payments, just as any renter would do.

With lease-to-own situations, everyone wins.  The home buyer wins because they get the home they want.  The investor wins because they have an investment with a guaranteed rate of return.  You get the commission you probably would have otherwise lost.

To service professional real estate investors well, you really need to understand them.  There are three types of residential real estate investors, each with their own ways of doing business:

1)    The Assigners: this is often an entry level strategy for real estate investors.  Assigning a property means doing a quick flip.  This is when an investor finds a below market value property and submits an offer with what’s known as an assignment clause.  If the home owner accepts the offer with this clause, it allows them to sell or ‘assign’ the contract to another investor.  An Assigner may have people who have never invested before looking out for properties for them.  These are called birddogs.  If the Assigner winds up making an offer on a property a birddog finds for them, the Assigner pays that birddog a fee (often $500-$1000).

Here’s an example of how a property assignment is done.  Let’s say a home’s market value is $200,000.  However, for some reason the owner lists this home at $180,000.  An Assigner investor puts in an offer for $180,000.  Within the offer is a special condition called an assignment clause.  This condition states the assigner can assign the contract to a pre-qualified buyer within a specific time period (a date before the closing date), in this case 2 weeks.  If the home owner accepts this offer, then this arrangement is signed between the seller and the investor.

The Assigner then tries to sell or ‘assign’ the contract for this property to another investor.  They have two weeks to do so (or whatever time period the Assignment clause stipulates) or they will have to follow through and buy the property themselves.  Since there is a $20,000 gap between the selling price and the market price, the assigner has quite a lot of room to play with.  They could sell the contract to another investor for $5,000.