I like HHI Investing, LLC answer because it's funny how he tries to defend the Rent-to-own model and trash or undermine Realtor views for opposing it all in one breath but I understand why. This type of purchase scenario only goes to benefit the owner or "investor", isn't that right HHI "Investing", LLC (See my point people)
So all the smoke screen comparisons to driving a car for fear of other driver not using their blinkers and other ridiculous comparisons are just slick sales talk not intended to benefit you as a buyer.
You're better off with a lease purchase "option" over Rent-to-own unless the seller is the one that will finance your purchase loan for that house and apply your entire rent toward your purchase of their home.
First take a look at WHY someone would want to Rent-to-own and how it would benefit you as a BUYER?
- You have bad credit now (so start working on fixing it and make an offer to purchase later, it's much safer)
- You don't have money for the down payment now (Well that's fine and all but what about closing costs, there is another trick of this, if you pay and pay to gather enough for the down payment, by the time you can purchase you'll be saying uh oh..... when you find that you'll also need to pay closing costs and don't have it just to lose all that money you saved for down payment)
That comparison of leasing a car to buying a home gave me chuckle to, funny stuff...
You're dealing with a lot of money and just as leasing a car is a waste of money for most people unless your a saleperson that uses the car for business use only and can deduct the lease cost 100% from your taxes or just want to trade it in for a new one every 3 years, it just don't make sense to do so and neither option would apply to the purchase of a house. Another thing left out is that when you lease a car your payments aren't higher than what the monthly purchase payments would be unlike with Rent-to-own.
I'm just saying, by the time that lease is up and your presented with the option to buy the car, it's usually no longer worth it but by then you have an emotional or financial attachment to it that leads to "pressure" or a mis-guided thought of loss if you don't follow thru with that purchase.
Maybe if that car or home "gains" in value and you preset the amount you are willing to purchase that home for in the rent to own scenario does it really make sense to follow thru with buying it.
- Remember you'll still need to qualify for a loan from a bank or 3rd party lender
- The home needs to appraise for the purchase price at time of purchase regardless of what it was worth when you made the offer or began renting. (This is why in a declining market this is a very bad option)
- Will your down payment or additional rent be refundable if you still can't get a loan later? (NO!!!!)
- Home inspections should be done BEFORE leasing at an inflated rate because if you later find issues with the house your stuck, especially if they apply the amount of rent over market norms intended for the down payment are not refundable and just applied "as rent" if you don't continue with the purchase.
I see many negatives to this type of purchase approach for a buyer, this is more of an "investor" or owner tool to get the upper hand and control in the purchase.