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Most sellers add a clause into the lease to buy agreement making the option consideration and the credits accumulated non transferable to anyone else if the current tenants cannot secure a home loan. If you are considering a lease to purchase home, try and have the lease to buy agreement curved in your favor and make the credits you earn transferable if you cannot secure financing for the rent to own home.
When you sign a lease for your rent-to-own home, you are also often required to put down what is called an option consideration. An option consideration is a percentage of the purchase price of the home, usually between 2% and 7%. It is usually a non-refundable payment, of which 100% is usually credited toward the purchase price of the home, which binds the lease purchase contract. You will have to come up with option consideration money as well as the first months rent to be considered for a rent to own home purchase.
One of the major concerns and problems with the lease to buy option is that the housing market can do a lot of changing in a year while the tenant is earning credits to buy the house. At the end of the lease to buy agreement, if the housing market is swift and a sellers market the seller may regret selling the home at a lower price. The value of the house may not be the same when the tenant tries to buy the home after the lease is up. If the housing market is doing bad, the tenant may lose money. If the housing market is doing good, the home maybe worth more then the agreed price and the tenant may have the chance to make some money.
When you are renting a lease-to-buy home, it is very important to get rent in on or before the day the rent is due. The earlier the rent to buy company receives the rent check, usually the more credits you receive for that month. If the rent to buy company receives the check after the day the rent is due, tenants usually do not receive any rental credits that month to put towards the purchase of the home. Do your best to make sure you get your rent check out as early as you can each month.
Renting a rent-to-own home usually requires the tenant to be more involved in home repairs and maintenance. Since the tenant is working and saving up credits to buy the home, the tenant is should have more responsibility and pride in the home. Landlords will still be responsible for major home repairs that would make the home unlivable but the rent to own tenant is usually responsible for all other repairs.
If the house fails to sell after the lease expires due to a reason on the tenant/buyers part. The seller gets to keep the options money put forward by the buyer to lock the agreement into place. It may be worth it to the seller to hang onto the property for longer then expected, if the market changes for the better over the year.
Renting to own is a good alternative for those who can't secure financial funding to buy a new home outright on their own or with the backing of a bank. Rent to own puts some of the rent money toward the price of the house in the form of credits. If you have bad credit or are unable to secure conventional financing to own a home, try calling a rent to own agent to discuss you options.
If you are looking to find a lease to purchase home, you should find a rent-to-buy agent that you like and can trust. The rent-to-buy agent will be the middleman and negotiator for the lease to purchase agreement and will also help the tenant locate the rent to buy property.
Having the rent to own agreement maybe a great asset to the potential buyers, if they find a serious defect with the house while living in it. They can chose not to pursue the rent to buy option after the lease is expired and they would only lose the options consideration put forward to lock the agreement in place. This money maybe way less then the cost of buying a house with lots of serious problems.
Tenants who attempt to buy a rental home on a lease to purchase option may not end up buying the home in the end. There are several more variables then just finding a home and leaving low percent of the final purchase price and paying the rent for the year. After the rent to buy lease is up, tenants will still need to be able to secure a home loan from a bank. If the tenant can't manage to clean up their bad credit during the lease, prove and document wages, or simply have a lack of income, they still may have a lot of trouble securing a loan. If the tenant is unable to get a loan after the lease to purchase agreement expires you also run the risk of losing the option consideration money, left on the property. Carefully consider all the options before doing a lease to purchase option.