I often see these kind of questions, and sometimes a variety of agent responses encouraging that this can be a good option for the consumer in need - those of us here seem to understand the dangers involved for someone who already has financial issues...
ok, but ....one agent on another forum referred to "lease-own" as though it were different from "lease or rent with an option to buy"....or a lease purchase, etc.. She seemed to emphasize the "danger" was in being evicted.........and seemed to thnk she was describing a different agreement than a "rent with the option to buy".
My question si:
Aren't they all basically one and the same, but just with different wording?
(although, I will grant that anything is possible if the terms are structured that way).
But - to my question - Am I missing something?
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The real estate market continues to demand flexibility. Lease Option properties can work for credit worthy buyers who are in a two home trap or who need time to work out SMALL credit issues.
Lease Options are regulated by law (Senate Bill 1015) but are legit and work great for Tenant-Buyers in a two home trap or who just need another 6-18 months to work out SMALL credit hiccups.
This is like deciding, "Gee, we'd like a new refrigerator, but the only ones we can buy on credit are these brands that aren't even rated by Consumer Reports, so let's go down to the store tomorrow and get one!"
The typical homebuyer evaluates between ten and a hundred homes before purchasing one. Given that maybe one out of a hundred (probably out of a thousand or ten thousand) homes on the market are "rent-to-own," you're basically selecting from the dregs that nobody with decent credit and a downpayment wanted to buy - or at a price that they didn't want to pay.
We used to talk about "price AND terms," and recently, the only "terms" that have mattered have been cash offers vs financing. But this RTO thing . . .
BUT: Let's just say the our renter/buyer actually finds a home and the terms are good and they think they're getting a good deal. WHAT IF . . . the seller stops making their mortgage payments, the seller sells the property to someone else (oops!) . . . or a major repair comes up?
From the seller's point of view . . . WHAT IF the buyer stops paying rent, or breaks something major in the house (the kid tried to flush a roll of TP down the upstairs toilet, for example . . . ) . . . Maybe you've been getting an extra 15% a month, but the difference between, say, $1000 a month and $1150 is nothing compared to your buyers thought they just about owned the place and started an unpermitted dormer addition and ran out of money.
I am not a fan.
Do yourself a favor, start saving your money, (this means living below your means), if you've got some credit issues start working on getting them squared away and avoid getting involved with anyone offering to allow you to "rent to own"
Usually, there is non-refundable upfront money - you will pay for the option to buy OR the right to walk away if you cannot, or choose not to buy the home for whatever reason.
If you do not have money to give as a deposit now, you will be asked to pay rent OVER and above the normal rent. That overage would be applied to the sale price if you buy the home, but forfeited if you do not complete the purchase.
Contrary to what some consumers think, this is not just a matter of "you pay rent and all of it is applied to the purchse....but if you can't buy the house, you simply walk away and get back your deposit.
So......anyone with financial issues now, better make sure they can follow through at the end of the lease period, or they will lose that money.
Also, usually the sale price is set now, not at the end of the lease.
And.........if the seller isn't making payments or is upside down on his mortgage, there will be huge problems that may put your deposit in jeopardy.
The list of potential issues goes on and on.
Look before you leap!
And, as has been suggested below - if you pursue this avenue - make sure an attorney is involved to protect your interests.
You can look on Craigslist.
Do not get into a rent-to-own without hiring an attorney to write the contract. And many attorneys will not write those contracts, since so few rent-to-owns ever result in a closing.
If the seller tells you that you don't need to have a home inspection, appraisal, title search, attorney, property survey....Run Away!