05/02/2019
Here are some important factors to consider when choosing a rent to own property.
There has to be an original agreement on the purchase price. Both the buyer and seller need to come up with a final price that they both agree upon. The terms are final and usually cannot be changed once the lease begins.
This option also eliminates the option for other buyers. The rent to own buyer will pay an “option fee”, which is negotiable and gives the buyer the option to purchase the home at a later time. This fee also prevents the seller from renting the home or selling the property to anyone else.
Once the final price is agreed upon and fees are paid, it is at this time that the tenant occupies the home. Generally, rent to own homes have terms of about three years, which gives the buyer a substantial amount of time to get their financing in order and fulfill the terms of the agreement.
Each month, the buyer will pay the rent, which goes toward a credit to be applied towards the purchase price of the home. If the buyer decides not to sell, that credit will stay with the seller and not be returned to the buyer. If the buyer does not follow through, the stand to lose thousands of dollars by not making the purchase but, this is not necessarily a bad thing. Situations change, things come up and perhaps this is not where the buyer actually wants to live permanently. This is really no different than making a rental payment each month except that the seller will now need to either reprint the home or put the home back on the market.
There are a lot of benefits for both the buyer and the seller in a rent to own option. The buyer’s credit will often be less of a deciding factor when qualifying for the purchase and their down payment may be smaller depending on what the seller will agree to. Sellers can also benefit because they are earning monthly cash if they don’t need to sell the home right away. Another perk for the seller is not the buyer will likely take better care of the home knowing that they may eventually own it themselves.
There are three parts to a rent to own agreement: the rental agreement, which outlines the terms associated with the tendency, the option agreement, which identifies the period by which the buyer has time to consider purchasing the home, and the sale contract, which identifies the term of sale and purchase price.
If you’re considering a rent to own option it’s also a good idea to speak to a real estate broker or agent that specializes in not only buying and selling real estate the property management as well. We can help you facilitate the transaction, talk about the pros and cons for your situation and help you execute the terms for a rent to own option.
