© dprevite (Flickr) The New House
© dprevite (Flickr)
What are the facts concerning rent to own
Leasing
If you are self employed or have a large amount of debts, rent to own may be right for you. A lease option is where you agree to rent a property for a period of time, usually one to five years. At the end of the contract, you agree to finance the property or lose your option money (deposit).
Keep in mind that you do not have to purchase the property. This is why the word "option" is used. You have the option to purchase or not. You will have no tax advantages on the home as you are not the legal owner of the property.
Lease to own contract
Protect your rights
If you choose to buy a home using a lease option, make sure you are either represented by an agent or an attorney. Protect your rights by knowing how to negotiate on such a contract.
Search online
There are many free rent to own contracts available online. You can simply search for free lease option contracts and a whole list of sites will be available.
Appraisal
Make sure to write down that the property must be appraises at the end of the contract. If the property is not appraised, the seller must agree to lower the price. The seller must also agree not to put any additional liens on the property.
Rent to buy scheme
It is sad to say that there may be a rent to buy scheme in your neighbourhood. Sometimes, there are unethical sellers who try to take advantage of first time home buyers who know little about financing.
In the main concept of rent to buy homes, the buyer gets a home and the seller is relieved of the debt. However, if the home does not appraise, then the home can never ever be financed. Most lease option purchases are done with a shake of a hand or a simple lease contract.
Losing the deposit
The buyer never requires an appraisal of the property and the seller may add on additional home improvement loans and keep all the cash. The house gets over encumbered and falls into foreclosure. The only option left is for the buyer to walk away and lose his deposit on the property.
Does this scheme happen often? More than you may think. If you are considering purchasing a rent to buy home, you must consult with an attorney first.