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Should you consider a rent-to-own home?

On Behalf of | May 16, 2022 | Real Estate Transactions

House prices are soaring, and mortgage companies are scrutinizing buyers harder than ever before. You need great credit, a lot of money to put down and extra cash for all appraisals and other “extra” costs of purchasing a home.

When you’re paying more for rent every month than you would on a mortgage, that can be rough to handle – and that can make rent-to-own properties seem enticing. Before you leap, however, you need to look carefully ahead. Here are some good questions to ask:

Why is this property being sold rent-to-own?

Sometimes, rent-to-own (which may also be called “lease-to-own”) properties are homes that were bought low and “flipped” by professional companies. Others may be one-offs, sold by a property owner who simply needs out of their mortgage as fast as possible. They may have struggled to sell the property quickly.

With the current housing market, however, there are few properties that sit on the market very long, so you should ask yourself what problems the home may have. Is it in a heavy crime area? Are there structural problems? Is the title clouded? Is the owner struggling to stay solvent (and could that lead to problems if you get entangled financially with them on the house deal)?

When a property is sold as rent-to-own, it can be a great benefit for people who have had problems putting together a large down payment or those with credit issues. However, it can also be a financial and emotional disaster waiting to happen. That makes it especially prudent to make sure that you do your research on the property (and the owners) and have an ironclad contract that doesn’t overly favor the seller. Experienced legal guidance is wise.