In these times when houses may sit on the market for extended periods and many people might not have enough money for a down payment on a new home getting creative may be the answer to solve your problems. That’s where the rent to own concept comes in.
Renting to own is a concept that could be considered to help two parties reach their goals. It is a concept that many people might not understand and many people might not consider. So, I will take a few minutes here and explain the basics of renting to own and hopefully show why you might want to consider this creative alternative to letting your home sit on the market.
What is renting to own? Renting to own is an agreement reached where the home owner will rent their property to an interested party with the option to buy the home for a predetermined amount at the end of the lease. There are a number of options that can be negotiated into a rent to own lease, below I will list several of them.
- The lease term, this could be a standard 1 year lease or and extended lease for several years depending on the situation.
- Initial earnest money or money down. This is money that the renter/potential buyer will put down to show they are serious about the potential purchase. This money will be applied towards the down payment should they buy but if they walk away the money generally goes to the home owner.
- Purchase price for the home. This could be a set price or a price that fluctuates with market conditions or percentages.
- Will any of the money being paid towards rent be used towards the purchase of the home. If a down payment could be a potential problem for the renter, part of the monthly payment could be set aside and used towards the down payment if the renter goes through with the option to buy.
- The option for the owner or the renter to pay for insurance, utilities or other home related expenses can be negotiated.
These are just 5 of the potential negotiation items for renting to own. There are of course numerous other items that can be added in as either party wants. But, now you should have a general idea of how a rent to own situation works and hopefully see how it could potentially benefit you. Of course you should always contact a licensed Realtor® to thoroughly discuss all your options.
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