Home Selling in 01022>Question Details

Martha1, Home Seller in 01022

What are the pros and cons of rent to own?

Asked by Martha1, 01022 Fri Jan 7, 2011

Help the community by answering this question:

Answers

9
BEST ANSWER
Pros: 1) You have a renter who is helping to offset your monthly mortgage (if you have one) and property taxes & insurance expenses. 2) The renter is likely to maintain the home and not trash it. 3) You MIGHT actually sell it.
Cons: 1) Rent to own deals are rarely successful. 2) Why is the renter a renter? bad credit? high debt to income ratio? Renters are renters for a reason. Is it realistic to think that will change with this particular renter? 3) You will have wasted all this time renting to someone when you could have sold it.
1 vote Thank Flag Link Fri Jan 7, 2011
Marta,

I have a story for you about a couple who was having their home foreclosed on and needed a new home someone took a chance on my buyer and now they actually have a home to call their own.. they really wanted this home more than anything and it was they only way it was possible. The seller really was not interested in this option at first but it has worked out for everyone for the best. Does it always work out this way ,no but for my client it has, This I consider a pro.
good luck,
Vera
1 vote Thank Flag Link Sat Jan 8, 2011
Sellers typically offer lease to own arrangements in slower markets where selling a home can be difficult. Buyer often want lease to own when they have credit or income issues that preclude buying at the present time but don't want to just pay rent - they want the possibility that their payments could be applied to a home purchase. Also, they could just be cautious and just want to feel out the area first. It does of course depend on how the lease to own is structured whether that is actually true.

The renter usually pays higher than market "rent" for the home and can be expected (depending on the contract and your states laws) to maintain it just as though they were the owner. The upside for them is that they usually have locked an option to buy the home at certain price (again depends on the contract) and if the market has gone up they can exercise that option. Downside for the seller is that they are locked into that price as well.

Hope that helps. You should be aware that your states laws could affect what you could include in that agreement. Consult with an attorney about the laws of your state.
1 vote Thank Flag Link Fri Jan 7, 2011
Martha.....Rent-to-Own's have many Pro's and Con's. May I provide you with the link to the late great Bob Bruss who was a Nationally syndicated real estate columnist, lawyer, and Broker. Here is what he wrote about Pro's and Con's for a seller (as I am going to assume you are in the position of a seller because of your name/login description):

http://www.inman.com/buyers-sellers/columnists/pros-and-cons…

Tim Moore......... I believe Martha asked: "What are the pros and cons of rent to own?" NOT...."Can you give me your personal feelings about how much you dislike rent-to-own's." Give her unbiased information & facts and let HER make the best decision she can with the information she obtains.

At least Sally was professional enough to answer the question from both the pro and con side. As well as Anna who seems to give professional answers on a pretty regular basis and Ms. Tina LeBlanc who gave a very nice unbiased answer to the question.

You and many other Agents consistently give your opinions or tell stories about things you've "heard", yet you provide no facts or personal experiences to back it up. I consistently ask you and other Agents on these posts how many rent-to-own deals you have been PERSONALLY INVOLVED WITH.
********You've even responded to another question referring to rent-to-own's with.... "I get questions about them all the time but luckily have not had to do one myself."!!!!!!!!!!!!!!!!!!!!!!********

Who would ever want to take advice on something you or someone else has never done?!?!?!? That would be like me going down to NASA and giving advice on the angle of re-entry needed for the Space Shuttle.

Darin Ray
Lease-to-Own Professional
Independent Consultant
0 votes Thank Flag Link Sat Jan 8, 2011
Sally hit it on the head. Renters are renters for a reason and to think that will change in a year is most often not going to happen. In these days of prices dropping, who would want to commit to a sales price a year from now unless it is lower than the current value today.
0 votes Thank Flag Link Sat Jan 8, 2011
Fine for the seller but the buyer rarely completes transaction, Most times because they are trying to buy what they can't afford.
0 votes Thank Flag Link Sat Jan 8, 2011
Before consider such a situation do inform yourself well beforehand; you may wish to consult with an attorney who specializes in real estate, and ask all your questions--there could be pitfalls that could end up costing you a bit of money...to consider, the upfront option fee; if you decide not to purchase at the end of the agreement, any paid upfront option fees and rent credited money will be forfeited; late payments may not be credited; any repairs become your responsibility, etc. As for some of the pros--you have time to rebuild your credit and possibly build up some income; depending on the agreement, at the end of the term you may choose to walk away, but again, if do so, you may lose money.....
0 votes Thank Flag Link Fri Jan 7, 2011
Not mentioned already are the tax reporting details you need to take care of. The amount of rent to be applied to the purchase has to be documented and recorded correctly, and apart from the security deposits. Ask a good accountant and a real estate lawyer. Also, if you have not been a landlord before, do a google search for "tenants rights" in MA. That is something I suggest to all new/prospective landlords in MA.
0 votes Thank Flag Link Fri Jan 7, 2011
A big con is that you lock yourself into a price in advance and the market changes and you end up overpaying. Plus who know what will be on the market when it is time to buy. The upside is obviously the comfort of tying up a home you love until you can afford to purchase it.
Web Reference: http://territory.com
0 votes Thank Flag Link Fri Jan 7, 2011
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer