Is Rent to Own Right For You?

Published by julia | Filed under Buyer / Seller Tips, Real Estate, Shout Outs, Uncategorized

With the credit crunch, more and more people are turning to rental properties instead of buying homes of their own. Some homeowners will offer these renters the option to “Rent to Own” the home after their first lease is up. Renting a home with the end result being ownership means paying the complete mortgage price for the home and any additional fees the homeowner wishes to add onto that amount. There are no lenders involved in the process and rarely any regulations that the renter knows about.

There are currently 47 states that have rent to own legislation in place to keep both the homeowner and the renter safe during the length of the purchase. The only states that have no state based legislation are North Carolina, Minnesota, New Jersey and Wisconsin. There are, however, federal rent to own laws that can be enforced in these states.

These rent to own laws, at first glance, seem to be more focused on the retail business who provides a rent to own option for the purchase of goods, but can also be used when the home is the item being purchased. The main rule is that all monies the buyer COULD have to pay during the time of the contract need to be communicated both verbally and in writing to the buyer. This means if you are entering into a rent to own contract on a home, there needs to be a formal contract that reveals ALL aspects of the buying conditions.

Rent To Own Changes in Law

Every year, at least 25 bills are introduced on federal and state governmental levels. These bills aim to tweak the laws that regulate the rent to own business and keep the consumer safe from fraud and unfair seller practices. The first line of defense is not the current or new laws, but the contract for the rent to own property.

A rent to own contract will need to divulge the total down payment required to purchase the home, the monthly payment for the home, the total number of months the contract will be in place and the total amount of money the buyer will be paying for the home. The buyer should have legal counsel read over the contract to ensure the seller has no way of backing out of the contract and keeping the buyer’s money once the contract is signed.