With the current state of the Real Estate Market a rent to own situation may work for both seller and buyer. For sellers the advantage is the renter will eventually take permanent ownership of the property. For the buyer who is cash strapped or credit challenged, this may provide and opportunity to get into a home.
Rent to own can be a great avenue for both sellers and buyers, but you have to be aware of potential drawbacks. You will really need to sit down and ask yourself specific questions to decide if rent to own is really an option for you.
Questions for a Seller
*Who will tend to the property and pay for routine maintenance?
*Who pays for major repairs?
*What are the costs of setting up and managing an escrow account for the portion of rent allotted to the down payment?
*Will you manage the property yourself, or hire an agent?
*What if the renters change their minds? Who keeps the money in the escrow account?
*If the buyers change their minds, what will be required to put the property back on the market?
Questions for a Buyer
*How much of the rent is going to the down payment?
*How locked in are you if change your mind? What will it cost you to get out of the deal?
*How long will it take to accumulate enough of a down payment that you are likely to qualify for a mortgage?
*What happens if you don’t qualify for a mortgage by the specified deadline? Can you continue to rent?
*Who will be responsible for routine maintenance?
*Who will pay for major repairs?
*Do you hope to strengthen your credit rating by paying rent on time? If so, will the owner report your good habits to credit bureaus?
Entering a rent to own situation can work, but you must make sure you have addressed any potential issues before you enter into a rent to own situation to mitigate any issues that can come up.
If you have any questions you can contact me at lcartolano@apr.com or at 510.213.1139
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