to rent, perchance to own.....aye, that is the rub

Driving around the North Shore the other day, I noticed that many of the "For Sale" signs in front of homes also have the words "Rent" or "Lease" added. Several signs only state "For Rent".

While there have always been some homes to rent here, it consisted of homes that had been purchased by builders and were waiting for the wrecking ball. Renters were typically those folks who were building a new home or addition and need another place to live for several months. It was a cozy arrangement, until the housing market drastically changed.

According to Terese (Terry) Penza, CEO and President of NSBAR (North Shore Barrington Board of Realtors), currently, 5.7% of detached single family homes are available to rent or buy. In the past twelve months, 3.9% of homes were first rented then purchased. (Caveat: there are no stats that those renters became the purchasers).

It now appears that renting with or without an option to buy is one of the strategies being utilized by sellers in an effort to coax buyers into action. For homeowners who "must" sell because they have purchased another home or are relocating, renting their home is a short term alternative that allows them to cover the costs associated with their home while waiting for it to sell. Renters get to enjoy all the amenities of the North Shore, without its' attendant obligations.

Renting to own is a much more complicated proposition. Under this arrangment, the parties agree to rent the home at a certain price for a certain time. At the end of that time period, the renters will then purchase the home that they are presently renting. While this may sound like an ideal solution in a shaky market, it is full of pitfalls. For buyers, this may be attractive because they would like to use their rent (or some portion of it) as the down payment. So their money is allowing them to live someplace while they are "saving" to buy. This option may be attractive to those sellers because they have the security of knowing that their home "is" sold.

In reality, this option has not been met with much success. According to Anne Brahin, managing broker of Prudential Preferred Properties, in Winnetka, there have been approximately 35 rentals in our office this year and that appoximately 30% of our inventory is available for sale or rent. The "rent with an option to buy" is not happening.

Buyers and sellers have been unable to agree on how and if the rent should be used as part or all of the down payment. Additionally, the parties have had trouble at arriving at the fair market value of the home. If they attempt to set an amount at the start of the lease and, if, housing prices fall, then the buyer will have made a bad deal. Conversely, if prices rise, then the sellers will face a shortfall. Both sides have been unwilling to take that risk. So, while this concept appears to be a "win-win" situation, it has not been shown to be a realistic solution in today's market.

On the other hand, the "rent" only option, has been more successful. Anne Brahin indicates that, on average, once renting became an option for a listing, 1 -2 months later, the place was rented. One of my neighbors, whose home has been for sale for a while, reports that once they decided to offer it for rent, they had several showings and their home was rented immediately. Rents are typically for short term periods (6-9 months). Both sides to the transaction have adopted a "wait and see" attitude.

So, depending on your needs, offering your home for "Rent" may be a solution. Talk with a realtor about specifics. Or send me an email.

This weekend is the Wilmette Sidewalk Sale. Please attend and support our local businesses. Don't forget to visit the parking lot behind "The Wilmette Pet Shop", where there will be all sorts of activities for man's best friend, including a charity "dog wash".