If you are a buyer:
· You move in and start using the house or apartment after paying as low as 3% of the purchase price
· During the rental period (3 years with a possible extension of up to 2 years), you rent the housing at a reduced rental rate rate, while accumulating a security deposit
· At the end of the rental period, you have the opportunity to purchase the dwelling for the previously fixed price, reduced by the sum of your accumulated security deposit
· Should you reject the purchase option, you will be returned your security deposit immediately; only the accrued rental rate discount will be withheld
If you are a seller:
· You get an opportunity to sell assets that lack liquidity at present market
· Before closing a purchase deal, you receive a moderate, but regular rental income
· Should the client refuse to purchase, you are protected against possible losses and receive a compensation in the amount of the accrued rental rate discount
· You place your object on our website for free and pay a commission only upon making a deal if you make a transaction
· A large selection of objects on our website - an opportunity to make a choice according to your preferences and capabilities
· We provide full legal support of the deal
· For the buyer our services and consultations are free of charge
How does it work?
With our assistance, you will be able to settle today on the right of tenant in the housing you prefer - an apartment or a private house, being granted the right to make a purchase deal at or before the end of the rental period (3 years) or to extend the rent for a reasonable period (usually up to 2 years) within which you will need to make your final decision.
To make a rent with a purchase option agreement, you will need to deposit a security deposit to the bank escrow account, equal to 3% of the purchase price fixed in the contract. The seller will agree to apply a reduced rental rate during the rental period to give you the opportunity to accumulate the necessary amount by monthly installments to the escrow account, which will be credited as the down payment and accounted for in the purchase price.
The usual rate of monthly installments is 0.25% of the purchase price of the property. Thus, by the end of the 3-year rental period, your accumulated funds, including the security deposit, will amount to 12% of the purchase price of the object. By the end of the rental period, you can add to your savings another 3% and to apply for a mortgage loan, that is usually up to 85% of the price of the property, or to extend the rental period, thus obtaining the opportunity to increase the savings, reaching the required minimum month by month.
The rental agreement with a purchase option is signed with a purpose of buying real estate, however, if the deal for any reason does not occur, the buyer automatically receives the accumulated funds back to his bank account after withholding the accrued rental rate discount which is fixed in the contract as the difference between the reduced rental rate and market rental rate.
Thus, even in unfavorable circumstances, the buyer is not exposed to any losses: he or she is in an identic situation to the one if they would have rented an apartment at a normal market price for 3 years. The security of accumulated installments is guaranteed by the bank, where an escrow account is opened, based on a trilateral agreement, which remains valid for the entire period until the purchase deal is made or rental agreement is terminated.
The seller thus gets the opportunity to sell the object at a fixed price in a foreseeable time, and if the property is not sold, the terms of the contract guarantee the receipt of rent at the market rate for the entire period of use of the property. The contract also protects the seller from possible damage to his property.
1. The Buyer enters into a Rental Agreement with the Seller with an option of purchase of a 100 sqm apartment. The price of the apartment is 1,800 EUR/sqm, that is, its market price is 180,000 EUR. The market rental rate of such an apartment is 6 EUR/sqm, that is, the monthly rental payment according to the market is 600 EUR.
2. At the same time, a trilateral Escrow Account Agreement is made between the Buyer, the Seller and the Bank, as well as a Commission Agreement is signed between the Seller and the intermediary company Easy Home.
3. The Rental Agreement with a purchase option is signed for 3 years. Since the Buyer plans to purchase the apartment at the end of the Rental Agreement, the Seller agrees to rent the apartment at a reduced rental rate that equals approximately to 3/4 of the market rate, thus the Buyer pays a rental fee of 450 EUR per month.
4. Before the start of the rent, the Buyer transfers the amount equal to 3% of the apartment price (in this example – 5,400 EUR) to the escrow account as the first security installment.
5. During the rental period, the Buyer, in addition to the rent, makes monthly security installments of 0.25% of the apartment price (in our example - 450 EUR) to the escrow account, which is 3% per year, or 9% for 3 years ). Thus, by the end of the rental period, the amount, accumulated on the escrow account, reaches 12% of the apartment price, or 21,600 EUR.
Upon the termination of the rental period 3 options are possible:
1) The Buyer purchases the apartment. In this case, the accumulated installments totaling of 12% of the price are included in the purchase price, thus it remains to pay another 88%. With the assistance of Easy Home and possible involvement of the Bank, where the escrow was opened (or another bank), it is possible to apply for a mortgage loan of up to 85% of the price, in this case the Buyer would need to add to escrow account additional 3% of the price, or 5,400 EUR.
2) The Buyer extends the rent (for 1 or 2 years). During this time, the same rental rate will be applied to the Buyer, and another 3% or 6% of the price, depending on the extension term, will be accrued on the escrow account by keeping on making monthly installments. Thus, at least 15% of the apartment price would be accrued on the escrow account and it could be possible either to get a mortgage loan without additional installments (or with a minimum contribution) or to reject the deal.
3) The Buyer rejects the purchase deal. In this case, he or she gets back the first installment of 3% of the apartment price, released from escrow account, but the total of accrued monthly installments paid during the rental period is returned to the Buyer after withholding the difference between the market rent and the reduced rent, granted during the rental period as a discount in the light of his intentions to purchase the apartment. In our example, this is the difference between 600 and 450 EUR per month, i.е. 150 EUR. Thus, the monthly installment made to the escrow account in the amount of 450 EUR will be refunded in the amount of 300 EUR, that is, from the total amount paid for 3 years, i.e. 16,200 EUR (450 EUR * 36 months) the Buyer will get refunded 10,800 EUR (300 EUR * 36 months). The difference in the amount of 5,400 EUR (150 EUR * 36 months) will be transferred to the Seller of the apartment as a compensation of the granted discount. Thus, should the purchase transaction be rejected, it appears that the Seller rented out and the Buyer paid for the rent for 3 years in accordance with normal market rent, therefore neither side incurs losses.