Big Ron, Other/Just Looking in Northeast Philadelphia...

what is rent to own & how does it work?

Asked by Big Ron, Northeast Philadelphia, Philadelphia, PA Tue Feb 1, 2011

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A Lease-Purchase or Rent to Own is a contract that allows the buyer the opportunity to take possession of the property before closing. In a Lease-Purchase a contract and a lease are negotiated and executed at the same time. The candidate for this program must like the property enough to buy the home. Security deposits, purchase price and monthly rent are all determined based on the property in question, and the buyers' ability to close. The sooner the buyer can close, the cheaper the monthly rent! These sellers allow Lease-Purchase agreements for candidates that may:
1. need immediate occupancy
2. need time to correct minor credit issues
3. don’t have a lot of money to put down
The lease portion of the contract is typically 6 - 9 months.
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Salafia Sold Team
0 votes Thank Flag Link Tue Feb 1, 2011
Hi Ron, These deals can be structured in a few different ways. My best advice to you is contact a local agent in the area you want to do this and let them guide you. There are no strings attached to having a conversation with an agent and you will hopefully get the correct info.

Christopher Pagli
Licensed Associate Broker
Accredited Buyer Representative
GREEN Designated Agent
William Raveis Legends Realty Group
0 votes Thank Flag Link Tue Feb 1, 2011
I think it also works great for BUYERS. In our area we have buyers with not so great credit but good income. If the seller can/will take the risk that you might default later, then we do have a small number of properties where we can do this. Normally in my office I ask for 10% or more down, and then the owner finances the deal and charges interest until the buyer pays off the house. I see it work out many times for both parties, not just the seller.
0 votes Thank Flag Link Tue Feb 1, 2011
It works best for the owners, keep that in mind.

You find a house, agree to purchase the house at a price a year or two from now. You put down a security deposit that you will loose if you don't buy when the contract says and you pay a monthly amount as rent each month. On top of the rent you will add an option fee of $100-$200 or whatever you agree on and the owner keeps that option fee each month to add to the deposit as your down payment when you purchase in a year or two.

The problems occur when you can not buy in a year or two for whatever reason. The owner then can keep your option money and deposit and out you go. Its better for the seller than you. What makes it worse is that prices have been going down and in a year the values could be lower, a bank might not even allow you to borrow then if the purchase price is too high which will force you to put down even more money or walk away.
I would urge you to avoid rent to own and just save and get in a position to buy when you can.
0 votes Thank Flag Link Tue Feb 1, 2011
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