Rent to own homes sound like a good idea, in theory, for buyers who don’t qualify for today’s low-interest rate mortgages. In practice, however, many people end up with this type of arrangement when they are already strapped for cash. You get to move in to a new house right away. You no longer have time to establish your credit score to qualify for a mortgage unsecured loan. And once you’ve locked down a price and signed a contract, you’re locked into that rate for as long as you live in the house.
That’s why some smart homeowners and apartment dwellers are choosing rent-to-own homes instead of conventional financing arrangements. With rent-to-own contracts, the contracts themselves are the loans. The seller holds the deed to the property, so you can bank on it if you default on the rent. If you successfully pay the rent, you keep the deed, and the owner gets their monthly payment plus any outstanding maintenance fees. If you don’t pay, you lose your deposit, so most owners try to work out deals where they can avoid getting this kind of hassle.
When you sign a rent to own contract, you don’t need a real estate agent to help you. There are some very good real estate agents who will help sellers get their best deals. Still, you can negotiate the contract on your own. Look around for people in your area who may be selling a home with rent to own contracts. Ask them for advice, and see what kind of deal they can offer.
A very good reason to purchase a rent to own home is that the price is usually just below market value. For instance, a two-bedroom home in Phoenix rents for about $930 a month. Buyers can buy homes for just half of that price. If they make no repairs or updates, the house should sell for only about one-third what the house was worth at the time of purchase. Buyers can negotiate this down even lower.
Lease agreements can have other advantages. Buyers in a lease purchase agreement don’t have to worry about paying extra money to a landlord in the form of late rent payments. They pay the initial security deposit when the home purchase contract is signed, and then they just make the required payments. They don’t have to worry about paying a commission to a real estate agent or an attorney.
Be wary of a lease purchase agreement that seems to have special provisions. Look for a contract that includes a rental period of at least three months. The length of the rental period depends on the type of agreement. If there are additional fees, those must be stated up front and separately listed in the contract. Also be careful to read over the fine print carefully before signing. The fine print is not a soft copy; it is a legal document that spells out the specifics of the agreement.
The best way to find out if the rent to own home purchase program is right for you is to talk to a licensed real estate agent. An experienced agent will know whether a buyer’s contract is right for them. They can also advise buyers on the pros and cons of a lease agreement. They can explain why a buyer might want to go with a rent to own program versus a traditional purchase contract. A buyer’s real estate agent can help the buyer understand the rules of the rent to own homes purchase program and help them determine if it would be a good option for them. In many cases, a real estate agent can even negotiate a lease agreement for the buyer and help them get into the best real estate purchase agreement possible.
Buyers who decide to go with rent to own homes usually receive a better price than those who sign a purchase contract. This is because the seller carries some of the costs of the property. Sellers also have some control over how much they spend on advertising, repairs and maintenance. The seller is often less concerned about the property and more concerned with making a sale.