If you have recently purchased a house but are not interested in paying for the full monthly mortgage payment or want to sell your house, rent to own may be an option. Rent-to-own, often referred to as rent-to-lease, is a form of legally recorded transaction in which real estate, usually used as collateral, is transferred for a monthly payment.
Rent to own can be done with any type of real estate. It is important that the property is of good quality and the seller is willing to pay for the property in monthly installments, which are due at the agreed upon date. Some types of rent to own properties include single family homes, condominiums, duplexes, apartments and mobile homes.
Once the property has been transferred to the rent to own buyer, they will then make the necessary monthly payments on the property. There are some sellers who are hesitant to rent to own but this is not always the case. Most sellers who decide to rent to own do so because they are financially strapped and can’t afford the down payment necessary for a typical mortgage loan. In addition, some sellers who rent to own will only pay a portion of the property’s total purchase price because they don’t want to pay for taxes, permits and other expenses associated with purchasing the property outright.
There are two types of rent to own deals; a lease option and a mortgage option. There are advantages to both, but the lease option offers several benefits including less hassle and less financial risk, whereas a mortgage option typically includes more financial risk, longer repayment periods and sometimes higher fees and charges.
Rent to own buyers have the right to purchase a property at any time, even if it is not available on the market. This gives them plenty of flexibility when it comes to buying a house. However, the buyer should consider renting to own when they purchase a home, particularly if the property will not sell quickly. By renting to own, the buyer will not be responsible for paying property taxes, maintenance fees and other costs associated with the property, and therefore allows the seller to avoid incurring debt.
Because rent to own is a legal agreement, it must be filed with the local authorities, typically the county clerk, to be valid. This documentation is important in that it ensures the transfer of title and also helps ensure the agreement is legitimate. If a transaction is not legally binding, the seller could be held liable for any costs related to the sale of the property or be forced to forfeit the property without knowing the true cost.
Before a rent to own agreement is signed, it is important to work with a qualified real estate agent, who has expertise in the industry and can help with all aspects of the agreement. An agent will be familiar with the local laws that govern rent to own transactions and can negotiate the best deal for the buyer. The agent can help the buyer and seller prepare their documents and make sure all papers are accurate and complete.
Since rent to own home buyers typically purchase a property for the amount of money they have paid upfront, they will not have as much bargaining power as a mortgage lender and therefore it may be best to discuss the agreement with a qualified real estate agent prior to purchase. Once the deal is finalized, the agent can take care of things from the time the property is listed to the time the payments are due until the time it is sold.