What is rent to own? Whi dies it benefit?

Asked by Vestia22, West Hempstead, NY Sun Jul 29, 2012

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Anna M Brocco’s answer
Anna M Brocco, Agent, Williston Park, NY
Mon Jul 30, 2012
Rent to own is similar to a car lease; such situations can be risky and one could stand to lose a bit of money, therefore inform yourself well beforehand, also consult with an attorney who specializes in real estate....
2 votes
Trevor Curran, Mortgage Broker Or Lender, Great Neck, NY
Mon Jul 30, 2012
Good morning Vestia22,

Rent To Own is a better deal for the Seller than it would ever be for a potential Buyer.

The basic concept is finding a way to "force" savings towards a down payment by including a portion of the monthly rental that goes towards that savings. You pay your rent every month and your Landlord deducts a pre-determined amount to hold in a special bank account, called an "escrow" account. Your Landlord holds that money until you have saved up enough---through this "forced-savings" method---to meet a down payment to purchase the home.

The terms of the purchase price, including the down payment amount, and the amount to be set aside from the rental for down payment, are all set down at the time of lease signing.

It's all about helping the renter/tenant save up enough money for a down payment to buy a home (in this case, the one you're renting). But this is a better deal for the Seller because he gets to lock in a purchase price and a buyer today for a future sale.


Saving money for a down payment? Well, heck, you can do that on your own.


If you are dedicated to the idea of buying your own home, you can create your own savings plan to save up enough money for a down payment. And when you have saved up enough for a down payment, if that takes a year or two or more, YOU get to decide on the price you're willing to pay for the house at that time based on current market conditions. You won't be locked in to a price that may be a lot higher than what the house is worth in the future.

With Rent To Own you'll be locked in both to the house and to the price, even if it takes you 3 years to save enough through the forced savings of the rent payments. What happens if three years from now your life situation has changed? Maybe you need a bigger/smaller home. Maybe your employment has relocated. Maybe your credit or income is insufficient to qualify for a mortgage loan.


Find a way to save up on your own; not with Rent To Own.


Sit down with a local Mortgage Banker and get yourself prequalified, too. You may find you're better qualified than you think you are, and, if you're not, at least you'll know how much loan your income and credit qualify you for, and how much you have to save towards down payment and closing costs.

Trevor Curran
NMLS #40140
1 vote
Ron Thomas, Agent, Fresno, CA
Sun Jul 29, 2012
Lease/Option
You are desperate!
Your Credit or Finances, or both, will not allow you to go the conventional route:
You need the Seller to help you out!

The Seller will know it, and you are going to pay dearly for this service:
There aren't too many altruistic Sellers out there.

The terms that can be written into a Lease/Option can be dangerous to you:
How long is the Option period?
How much money are you putting in to the Option?
What happens if you are not able to execute the Option?
How do you know what your financial situation will be 2-5 years from now?
How much is the rent in the meantime?
Who will be responsible for maintenance and repair in the meantime?
What will be the Market Value of the home in 2-5 years?
What will be the Selling price 2-5 years from now?

This is the Ultimate Caveat Emptor!
1 vote
De Vonte Wil…, Agent, East Point, GA
Sun Jul 29, 2012
Rent to own is simply when the Landlord and the Tenant agree that they will Lease the property with the option of the Tenant to purchase the property at the end of the lease.

It is truly a simple concept, giving the Tenant an option to purchase the property. However, sometimes it can get complex. For example, some Landlords will set a regular rent price, for example; $1,600/mo and add an additional $500 a month to total $2,100.00 per month in rent. The difference between the regular rent and the additional rent will go towards your down payment over the life of the lease, should you purchase the property. However, if the Tenant decides not to purchase the property, the difference in rent is often forfeited.

When considering a Rent to Own Agreement, it is always a good idea to consult the counsel of attorney.

I hope this answered your question! If you have any further questions, please feel free to contact me by the ways below.



De Vonte Williamson
Licensed Real Estate Salesperson
Serving Long Island & Queens
Coldwell Banker Residential
Direct:(631)638-6193
Mobile: (631)384-3695
Fax:(631)236-1478
cbmoves.com/DeVonte.Williamson
"I Stand Behind Getting You Results!
Your Trusted Real Estate Professional for Life!"
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