Rent To Own
The most sought-after property in this tight lending real estate era is a rent-to-own or lease-option. Many prospective homebuyers are exploring owning a home but with less that friendly credit or some other hindrances they are requesting that Realtors search for properties that they may be able to rent now and have the option to purchase later. These rent-to-own properties require buyers to pay extra rents each month plus up-front fees to about 5% of the purchase price. The regular portion of the rent goes in the owner’s pocket and additional funds are used towards buying down the price of the home. With everything there are advantages and shortcomings so I would be remiss if I did not explain the ups and downs to a lease option.
These contracts are generally written to close within 12 to 36 months so that it gives buyers the opportunity to become familiar with the homes and neighborhoods without making major commitments. Mostly it serves as a time buffer allowing tenants to save up the down payments and improve their credit; the end result being a smoother transition while obtaining a mortgage.
You may lose your investment. There is little protection for buyers who fall behind on payments. Failing to pay the required rent would result in an eviction from the property, all the upfront fees and rent premiums that you have paid beforehand are forfeited. Other issues that may arise such as the inability to arrange financing at the end of the rental period may cause all invested funds to be lost.
My personal advice to anyone is to thoroughly weigh their options before entering an agreement and determine what would fit your needs better. Seek help from a professional Realtor or Real Estate Attorney.
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