The Benefits of Rent-to-Own

A rent-to-own transaction affords opportunities for both buyers and sellers. The buyer and seller enter into an agreement that enables the buyer to rent the home with the intention of buying it. Typically, a contract is executed including an agreed-upon sale price, although sometimes the sale price will be left to a future independent appraisal of the property.

Rent-to-own contracts usually include a date by which the home will be purchased outright by the renter. Buyers and sellers can benefit from rent-to-own transactions. Depending on the conditions of the contract, either the seller or the buyer may be responsible for routine maintenance, major repairs, insurance and taxes.

Down Payment

One of the benefits of a rent-to-own opportunity for a buyer is that there is a much lower down payment required than in a conventional home purchase. Usually, rent-to-own contracts state that part or all of rent payments go toward a cumulative down payment for the renter, who will use the down payment to obtain a mortgage to buy the home at a later date. This allows the renter to build up a down payment over time using the money they’re already paying as rent, instead of having to scrimp and save extra cash from already stressed budgets.

Taxes and Insurance

Depending on the agreement, the renter may not have to pay taxes or homeowner’s insurance on the home. This must be negotiated when entering into a sale contract. If no taxes are paid, only renter’s insurance is needed to cover the contents of the home, and is less expensive than homeowner’s insurance.

Neighborhoods and Schools

Prior to obtaining a loan for the home, those who rent to own can find out if they are comfortable with the neighborhood and with the schools where their children will attend. If they are not, there are ways to opt out of the contract.

Condition of Property

By living in the home, buyers who rent to own have the advantage of gaining information about the home. In a relatively short amount of time, the renter discovers what condition the house is in and whether expensive repairs to major components of the house including the HVAC, roof and foundation, might be needed.

Fixed Purchase Price

Before signing the rent-to-own contract, a renter works with the seller/landlord to determine a fixed sale price of the home, or if the sale price will be determined at a later date by an independent appraiser. If a fixed sale price is determined, then the price remains the same throughout the time frame of the contract. Contractually, it cannot be increased, and neither can the payments.

Resident Buyer

For sellers, a rent-to-own candidate presents a significant convenience. The seller does not have to advertise for a buyer, enlist the assistance of a real estate professional or wait for someone to make an offer on the property. Instead, the seller has a captive audience -- a resident buyer.

Savings

Contracting with a renter to buy the home without using a real estate agent saves the seller a commission that otherwise would have cost several percentage points. Based on a 5-percent commission, the seller saves $10,000 on a $200,000 home.

Home Values

Regardless of whether home values decline, rent-to-own buyers are obligated to pay sellers the amount agreed to in the rent-to-own contract if they want to purchase the home. This benefits the seller, since declining home values don’t reduce the amount the seller receives in monthly rents. Of course, if the home declines in value, the renter does not have to purchase. They have the option to purchase – which is why rent to own contracts are often called “lease option” – but are not obligated to buy the home.

by Sherry Davis Zander, Demand Media

We have a lot of Rent to Own homes available now. Call or text 630-697-4500 or email Adam @ MyHappyHomeSolutions.com for more info, or visit our website at MyHappyHomeSolutions.com to watch video tours and get more info. Please note that not all available rent to own homes are shown on our site. Sometimes they are rented before we even have a chance to post them, so get on our mailing list to stay informed about all new properties!