Alternatives to Traditional Mortgage Financing in Residential Real Estate: Rent to Own and Contract for Deed Sales

Min Park ()
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Min Park: College of Business Administration, Alabama State University, Montgomery, Alabama 36104, USA

Quarterly Journal of Finance (QJF), 2021, vol. 11, issue 02, 1-31

Abstract: Due to the tightening of conditions required to obtain a mortgage loan following the recent financial crisis, the rent-to-own contract and contract for deed sales for residential real estate have become increasingly popular among potential home buyers and sellers. In this study, after analyzing the embedded options in the contracts, I use option-theoretic methods to develop models for valuing both contracts for deed sale and rent-to-own contracts, which can be used to determine equilibrium monthly payments and the equilibrium down payment.

Keywords: Rent to own; contract for deed sales; installment option; asset pricing (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S2010139221500075

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