It may sound too good to be true, but it can be authentic: also known as a ‘Lease Option,’ the Rent-to-Own scenario is one that can help tenants clear major hurdles on their way to homeownership. It can postpone the need to satisfy newly tightened mortgage lending requirements, and eliminate the immediate need for a large down payment. For many who are temporarily in the process of climbing out of credit or cash flow problems, it sounds like a ray of light…
And if you are thinking it also sounds like a free lunch (or a clearance sale on the Brooklyn Bridge), you’re right to be skeptical. It’s always best to familiarize yourself with all possible outcomes for any major transaction — and a local rent-to-own offer definitely qualifies as one of those!
Among the key points rent-to-own candidates should watch for are online ads that sound too good to be true. They often are. If an offer says that your credit and income aren’t important, be wary. It could be one of those rent-to-own offers that turn out to be intentionally fraudulent. The supposed owner may not really own the house. A scammer could get the prospective buyer to put up money for what seems like a quite reasonable down payment, but, since he/she is not actually the owner, the money is lost. Working with a reputable agent is one of the best ways you can be sure what you sign is a legitimate contract.
It is also good to be aware of the seller’s credibility. The seller may offer the renter the option to buy the home, but that will only be possible if the seller is in a position to do so. Should the tenant make payments, but the seller does not, a home could tumble into default or foreclosure before the tenant reaches the purchase point. It could wipe out funds already contributed.
According to MSN Real Estate, before you get started in the rent-to-own process it is important that “you understand the possible pitfalls”. Without a clear and binding contract, the owner may never intend to sell the renter the property, and simply string the tenant along. There could be issues about repairs. If the water heater breaks, for instance — who pays for it? What about property taxes? What if there is a lien against the house? Or mold shows up on an inspection?
Rent-to-own scenarios can be a real solution for potential buyers who need to buy time, but the abundance of possible pitfalls require thorough consideration. If you are interested in a local rent-to-own house, be sure to consult with a real estate professional and an attorney. We are here to help our clients put together great deals; call us if you are looking to buy a home and want to explore the latest options.