Profile picture for rmann4858

Rent to own

I am looking into the rent to own program. Is this something you would recommend? Do any of you offer this?

Thank you,
Rhiana
  • August 01 2012 - Bradenton
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Answers (7)

Best Answer

I remember answering this question a while ago on Zillow and have pasted that thread discussion below:

http://www.zillow.com/advice-thread/Is-it-possible-even-a-good-idea-to-look-into-Rent-to-Own-homes-with-having-bad-credit/437746/#comment-response-1488486 

My answer to you would be it depends on WHY you are looking at a rent to own. Lease options aka "rent-to-own" get a bad rap because they are complicated transactions and most realtors don't even do them. In reality they can work out just fine for the buyer IF DONE CORRECTLY. Would I ever try doing it alone? 100% never. In some situations would I prefer a lease option versus a contract for deed? Yup.

Bottom line is people don't like what they don't understand. It is always funny to me, because the majority of buyers don't even understand traditional financing (or their rights by the way) yet blindly trust banks easily. Education is empowerment and that is the truth.

If you want I have some handouts and resources you can go to that explains the pros and cons of a rent-to-own. From there find a realtor that specializes in rent-to-own (if they do then attorneys and the correct title companies should already be in place) so you can get a better understanding of how they work.

Do not jump into this until you have representation and fully understand what you are getting into. In that regard I agree with what everyone else has said. If done incorrectly a lease option can be disastrous to the buyer. 
  • August 01 2012
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Profile picture for sunnyview
Lots of scams out there so you need to get legal advice before you enter into anything and ask that any down/deposit money be help in escrow and not by the seller until the house is actually sold.

A wise agent once said that rent to own is where unrealistic sellers meet unqualified buyers. That is often true can leads to issues especially without a tight contract.
  • August 01 2012
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There is no "program." There's not even a "standard way" of doing a rent-to-own. There's also the issue of whether attempting a "rent-to-own" is a good way to achieve your goal.

A lot of people look to "rent-to-own" because of credit issues, but owners are as wary of these credit issues as lenders are. Because the selection of homes is so low - fewer than 1% of homes for sale have sellers that would consider "rent-to-own" - it almost guarantees that the buyer will be seriously compromising their home choice in pursuit of favorable terms.

Sometimes, the terms aren't so favorable. The rent is usually higher than the going rate, and sellers often ask for large cash deposits.

There's also the issue of protecting yourself in case the seller lets the house go into foreclosure.

I so do not recommend this to buyers.

All the best,
  • August 01 2012
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Profile picture for wetdawgs
While the theoretical concept of rent with the option to buy may seem attractive, some of the realities are considerably less so.

Owners who will consider rent to own are very rare, so it will cut down your options for properties considerably.   I consider it much smarter to spend a year or two working on improving your credit and (if necessary) saving up a good down payment.   Yeah, it is tough to move but it even tougher to lose a lot of money attempting to buy.

Some features of rent to own:

1.  Down payment required - often substantial (say 10%) and is often non-refundable if the potential buyer doesn't purchase.

2.  Monthly rental is above fair market rent, with the only amount going to purchase is the amount above the fair market rent.  This is also not refundable.

3.  If not qualified for financing at the agreed upon  time and price, then you lose everything. 

4.  The price is agreed upon at the beginning of the contract, and housing prices may still be decreasing.

5.  You still depend on the owner to pay their mortgage.   If they fail, you lose.

If you do get involved in this, please involve an attorney in the contract.
  • August 01 2012
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Rent to Own in Real Estate is usually a losing situation for the potential buyer.  Too many things can go wrong with the transaction down the road when it's time to excercise the option.  In most cases the buyer loses all their option money and the excess money they paid during the term of the contract. 

Be very wary of rent to own, not to mention, the scam are numerous in this arena.
  • August 01 2012
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Rent to own or "lease option" is one way to achieve home ownership.  But in today's tighter real estate market it is much more difficult to find sellers willing to do this.  I assume you want to lease option in order to save up some down payment.  I think you should investigate FHA financing.  These loans allow a buyer to get in with 3.5% down or even less.  The down payment can be a gift from a relative and the seller can pay your closing costs.  I think it is a better way to go than the rent to own scenario you are considering.  I hope this helps, good luck.
  • August 01 2012
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Profile picture for NikoleD
Be careful there are some scams out there. Also some of the home that offer rent to own are overpriced and the reason they are doing this is because they could not sell. Hope this helps a bit
  • August 01 2012
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