How Rent-to-Own Homes Work?

Answer 1

RENTING TO OWNIn today's soft housing market, renting to own has made a resurgence. Also known as leasing to own, this can be a viable option for many.Renting to own works much like a car lease. Part of your monthly rent payment is put aside by the seller towards an agreed-upon down payment towards a set purchase price. Advantage for the Seller

Rent to own arrangements can help a seller who has been unable to sell the property at a price they are comfortable with. The seller (owner) will have a monthly income from the property.

Advantages to the Buyer

For many, lack of a solid credit history can prevent a traditional home purchase in the current market. A rent to own arrangement is a way around this roadblock. Some of the monthly rent is credited to the buyer while they have a home to live in.

Caveats

For both parties, a legally binding and comprehensive contract needs to be in place to protect the seller and the buyer. Having a contract reviewed by an attorney who specializes in real estate is essential. The terms of the contract should be clearly spelled out. A fixed time period should be set after which time the sale of the property is completed. Depending on the agreement, the buyer may have to pay an upfront option fee as well as be responsible for some or all home repairs. If the seller falls behind on their own mortgage payment, the home may still be foreclosed upon by the lender. On the other hand, if a prospective buyer comes along with a higher offer for the seller, the seller is out of luck and will be bound by the contract. There are pros and cons to these arrangements, and financial and legal professionals should always be consulted prior to entering into a rent to own contract.