Consider These Things Before Getting A Rent to Own Home
Make sure the seller isn’t at risk of losing the property
If the seller ends up losing the property during your lease agreement, you could end up losing all the money you had paid towards the purchase price while also suddenly being without a home. Make sure the seller is financially stable and is not entering into legal proceedings, such as divorce or racking up any serious debts. Some home owners try to use a rent to own lease agreement as a last attempt to pull themselves out of financial ruin.
Ensure that the contract states who holds financial responsibility for repairs
You don’t want to be stuck paying for huge repair expenses, such as roof damage or plumbing problems. It’s okay to accept responsibility for smaller issues and general upkeep, but it is important to be aware of what exactly you should be prepared for.
Be aware of a lease-option agreement vs a lease-purchase agreement
A lease-option agreement gives you the option to purchase the house while giving you the ability to back out if you change your mind. A lease-purchase agreement makes you legally obligated to purchase the house by the end of the term. If you choose to enter into such an agreement, it is vital that you will be able to purchase the house by the end of the lease.
Make sure the house is set at a fair price and is in good condition
It’s advisable that you hire a professional to appraise the house for you as it’s common for sellers to try to take advantage of potential buyers by inflating their prices. It is also recommended to hire a home inspector to verify that there are no major issues with the property.
You may end up paying more than the home is worth
Many contracts state that the purchase price be kept at a set price despite possible changes in market value that may happen in the future. This could mean that, if the market drops, you may have to pay more than the property is currently worth. However, this could also work in your favor if the market value instead increases, but you still only have to pay the original lower price.
Make sure you will be eligible to purchase by the end of term
A rent to own agreement is not a good option unless you can be certain you will have the financial stability to purchase the house or at least be eligible to take out a mortgage by the end of the contract. Otherwise, this agreement will not be beneficial to you as you will end up losing payments you made towards the house or face legal proceedings if you are under a lease-purchase agreement.
Be aware that you may be paying a higher rent than normal
Since part of your rent is a premium that goes towards the cost of purchasing the home, your rent will likely be a little higher than a normal renting situation. Be sure to factor in this extra cost when deciding if this type of lease agreement is worth it for you.
Be aware of the terms of the lease to avoid violating them
If you violate any part of the contract, you risk being evicted and losing any payments made towards the home. These violations often include missing even just one month’s rent even if you have been faithful for many months previously.
