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What is rent to own?

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October 06 2013 - Woodlawn
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"rent to own" is where buyers who are not currently qualified for a mortgage attempt to buy a home at very huge risk to their financial savings.

While the theoretical concept of rent with the option to buy may seem attractive (whoopee, pay rent and end up owning the property!), 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%, 20% or even 30%) and is 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 who knows where house prices are going.

5.  You still depend on the owner to pay their mortgage.   If they fail, you lose.  (this is very common. You are simply a tenant in the eyes of the law until you've financed in your own name).

If you do get involved in this, please involve an attorney in the contract.



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October 06 2013
 
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What is rent to own?
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October 06 2013 | 1 answers
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