1. the sale price is set in advance, at the time the agreement is signed (personally, in this unpredictble market and economy, I would not set a future sale price on any home)
2. there is NON-refundable "option", or upfront money, which you will not get back if you do not purchase the home........
3. the seller must sell to you, but you do not have to buy (that's where the option money comes in)
4. if you do NOT qualify for a mortgage, and cannot proceed with the purchase, you will most likely forfeit that upfront money, so you need to be sure you WILL qualify...and also protect yourself by stating that the house must appraise out for the agreed-to purchase price.......remember, you will be setting a sale price for the future, and who knows what may happen in the next year or so.
4. Contrary to what a lot of buyers think, your full rent payments are not totally credited towards the purchase - usually only an amount OVER and above the normal rent would be credited, or applied to the sale.That's the amount you would lose if you don't "exercise your option to buy".
Really understand what you are getting into before entering into this kind of agreement.
An attorney should look this over, or even prepare the contract to make sure you're protected.
If you currently have credit issues, I'd suggest you work on improving them first.
If all is well, credit-wise, but you don't have money to put down, why not just save an amount each month and then decide what to buy, and how much to pay, when the time comes?
One big advantage is that for a relatively small capital investment one can take a particular property off the street with a pre committed price for a very small amount of money. I've done them for $1000 and they worked out quite well for all parties.
This gives a young couple an opportunity to save money for a down payment, build their credit, extend their employment longivity all while maintaining a vested interest and a sense and pride of ownership. As in any business undertaking, howver, there are caveats and risks. If you end up not following through or otherwise breach the terms and condiditions of the lease option agreement you can lose your initial investment.
On the other side of the coin, however, the lessor runs the risk of tying up his property for an extended period of time thereby losing out on other more immediate buyers. Threrefore most L/O's tend to have escallation clauses built into them that adjusts for appreciation. So the longer you wait to exercise the option the more the home will end up costing you whence you convert the option.
Rent to own is very very tricky. You need an experienced Agent to handle this. Start researching them in the area you are planning on looking & go from there.
Sometimes you are bettter of waiting a few years & saving money for a traditional sale.
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The Marie Souza Team - Top Selling on Cape Cod
Cape Cod Real Estate Services