When looking to buy a home, rent-to-own can help you secure a property, even if you have poor or insufficient credit. People who are struggling to sell their home, or who would like to sell it to someone who may not qualify for a traditional mortgage, can also benefit from a rent-to-own arrangement.
Details of a Rent-to-Own Contract
Many people confuse rent-to-own with a lease-option contract, which is entirely different. In a lease-option, the person occupying the home and making rent payments has the right of first refusal if the house goes up for sale. He or she does not promise to buy it. A rent-to-own deal is a legal contract to buy. A rent-to-own deal is a contract between buyer and seller that typically extends one to two years into the future. The main difference is that it gives the buyer time to obtain acceptable financing and save for a down payment.
Buyers and sellers should include the following information in a rent-to-own contract:
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The full name of each party, the property address, and the date of the agreement
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The terms, including amount of rent, payment due dates, grace period, and late penalties
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The contract should indicate how much of the rent goes towards the purchase price
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If necessary; a pet policy may be included, as well as a utilities payment schedule, who can reside in the home, and who is responsible for property maintenance during the rental period
The amount of the “option consideration fee,” which is separate from a security deposit, should also be included in the rent-to-own contract. This fee is paid out to the homeowner in exchange for a written agreement to not sell the home to anyone else. When the buyer changes over from renting to owning, the entire amount of the fees collected by the seller should be subtracted from the purchase price.
If you’re interested in rent-to-own as a buyer or seller, please contact one of the Longwood Residential professionals for assistance.
