Before you place your signature on anything make certain that you are dealing with the owner. This can be done online at your local register of deeds. Check by name and property address. This is important because you should also see any registered liens on the property. It will also tell you if the taxes are up to date. Owner ship of the property is important because the paper work presented to you must contain the signatures of all property owners. When you search by the owners name you also see the other properties that are owned in that county. Look at all the properties find out how many are owned how long they have been owned how much is owed and very important are taxes up to date. It is important that you know who you are dealing with. If they have a lot of rental properties check for complaints. If they have just acquired a lot of properties be careful new investors are dangerous. If they only have a few properties look at the paper work carefully they may be well intentioned not well informed. Make certain that what you find is representative of how they portray themselves to you. If things do not add up walk away quickly.
The agreement usually states a portion of your monthly payment is applied to the purchase of the home. The rent is higher than the market rent for the property. This is justified by the owner because you are buying the home and the added payment is going towards the purchase. It is important that you understand that this additional money is non refundable if you decide not to complete the transaction. A portion of the deposit is considered a down payment and is non refundable. Often this is the entire deposit. The deposit can some times be broken down into installment.
You are responsible for the up keep of the property, broken windows, leaking faucet, stopped up drains normal home owner chores. The property owner would handle major items such as roofs heating and air conditioning. I have seen agreement that require perspective homeowner to participate in the cost of these items too.
You will still be required to get approval from the property owner before you make major changes to the property, just like a renter. Permanent additions such as decks, fences, patios and some plant become a part of the property and belongs to the home owner at no cost. It is normal for you to improve a property that you plan to own. This is one of the reasons land lords love these contracts
Rent to own is the same as lease with an option to buy. Rent to own just sounds better. The fact is most of these contracts give you little to no interest in the property . Effectively you are a renter with rights to the property that are granted in the term of the lease. The extra moneys that you are paying are a option amendment to that lease. The option will spell out what is required of you to have the right to purchase the property. The terms should spell out how much money will be applied to the purchase price. The price is usually agreed on by the parties when the lease is signed. The deal breaker often is that the buyer must find a new loan to purchase the home. The option has a term and must be exercised within the term or it is lost. If at the end of the term you still want to purchase the home but are not quite ready the terms have to be renegotiated this may mean a increase in the selling price of the home. If you decide to walk away then you lose the money you put into the option.
There are dangers to the rent to own contract that can be avoided if you keep your eyes open. Make sure that you are dealing with the owner. Make sure that it is a good deal that the property is worth the sale price. Make certain the terms are reasonable. Have the home inspected just as you would on any purchase. Have the seller disclose the any loans on the property. Have the seller agree not to place any new loans on the property with out informing you. Sit down with a mortgage lender to determine what you need to do to purchase the home. Negotiate the terms for extending the option in case you need more time. Make certain that you understand that you may walk away with nothing. The big one; The property owner could have money problems and lose the home you are renting to buy and you can be out on the street.
Rent to own can be a good deal and in these times many families are using it. Many who have lost their homes, jobs and or credit find this a good option. They need to rebuild their lives and this option can lead to home ownership again. Land lords love it because the renters have a vested interest in the property so it encourages them to take better of it.
If you are considering this option then I encourage you to speak with a lender. You may be surprised and find out that you can buy now. If you tell the seller you can get a loan for the home now and they say no they do not want to sell right now. Walk away there is something wrong and you don't need it. The lender may tell you what you need to do to get a loan, now you have a track to run on to become a owner. Good luck and remember GODs Blessings Require Your Participation