Advantages and Disadvantages of Rent to Own

 Ioffersolutions Real Estate Service Inc.

Advantages and Disadvantages of Rent to Own

For many people, a home will be the biggest purchase they ever make. Both buyers and sellers should carefully weigh their options before agreeing to any binding contract
Let’s look at some of the advantages and disadvantages for buyers in a Rent to Own.

Advantages and Disadvantages for the Tenant Buyers

• Buyers have time to build income and repair their credit history as they rent the house.

• Depending on the agreement, renters can walk away if they find something seriously wrong with the house. Although the renter will lose the option fee and all of their rent credit money, that amount will be much less than if the renter had bought the house outright and then tried to leave it later.

• If the buyer hasn’t taken the necessary steps to fix their credit issues and can’t qualify for the mortgage at the end of the term they lose their option fee and their rent credit money.

• Buyers still have to pay the upfront option fee. It’s usually a percentage of the agreed-upon selling price of the home and is often thousands of dollars. Although this money will go to the down payment should the renter decide to buy the house, it can still be difficult to accumulate that much money before renting.

• If the buyer is just one day late on a month’s rent payment, most agreements void the rent credit for that month. Think about the previous example, where the three-year renter received a $400 rent credit each month. If the renter were late just three times each year, at the end of the lease period the renter would have $3,600 less for the down payment. Rent-to-own leasers must pay on time, every time.

• All of those repairs that used to be somebody else’s problem in a rented apartment often become the responsibility of the new buyer, even during the rental period. Whether it means climbing on a ladder to unclog the gutters or having to pay for a new washing machine when the original washer breaks, the renter has to take care of it.

• It is easier to qualify then through traditional lending institutions.

• Your final purchase price is GUARANTEED in advance.

• You are free to do any renovations, which can increase the value of the home without increasing your purchase price.

Prior to entering into any agreement it is important to know the advantages and disadvantages as well as your risks.  If you are serious about home ownership and are willing to make the necessary efforts to qualifying for the home at the end of the term then the risks and disadvantages are far outweighed by the advantages of a well set up Rent to Own program.