To Rent-to-Own, or Not… That is the question!

Rent to Own HomesMore and more lately we have been getting the question “Are there any Rent-to-Own homes available?” Of course there are! Any home can actually be a Rent-to-Own home. . . IF the seller is willing! Finding the home of your dreams and then finding out you have bad credit can dash those dreams quick! But credit can of course be repaired with time and effort. If you can make the time and take the effort perhaps renting to own that dream home may be the best option. Just remember there are some significant details to take note of. . .

Checkmark If the seller is willing to work with you on a Rent-to-Own, or Lease Option, it means you can move into the house immediately! Negotiations must be made beforehand though. Terms and conditions must be met according to the contract. Renting the property for the set time period may give you plenty of time to save and repair your credit score.
Checkmark Know the difference between Lease Option and Lease Purchase. Lease Option give you the right to buy but not the obligation to buy at the end of the lease. With Lease Purchase (without the word Option) you could be legally obligated to purchase at the end of the lease.
Checkmark Option money, something similar to a down payment, must be given to the seller. This will be a percentage of the purchase price of the home. Depending on the negotiations some or all of the option money may be applied to the purchase price at closing.
Checkmark Purchase price of the home can be determined at contract signing or possibly when the lease expires. If at the contract signing the purchase price is essentially “locked in”.
Checkmark Rent is often determined by the seller. Depending on negotiations a percentage of, all, or none of the rent goes towards the purchase price of the home as a credit at the end of the lease period.
Checkmark Make sure to pay close attention to maintenance and fee requirements in the contract. Often times all home maintenance will be required to be completed by the buyer. Same as with any lease, you will need a renter’s insurance policy as well.
Checkmark Unfortunately if terms of the lease are not met the seller can begin the eviction process. If evicted the option money and rent credit will be lost. Be aware of the contract! It could become void after being late on one payment or not completing repairs. Also, if the seller would foreclose all money could be lost and you be forced to move (as with any lease).
Checkmark At the end of the lease you as the buyer would simply apply for financing to purchase the home (unless purchasing with cash of course). If the property is not purchased at the end of the lease all option money and rent credit will be lost. This is a time to pay close attention to the contract. If the contract stated you were legally obligated to purchase then legal proceedings could be started by the seller.
Checkmark Finally, it is always a good idea to have a real estate attorney look over the terms of the contract as well. Rent-to-Own contracts often times have very complicated language.

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