Rent to own homes is recently becoming a trend as they provide an opportunity to potential buyers to escape the rent trap. In the agreement, a buyer will come in a lease contract with the landlord with an option to buy the house after some years. Since it isn’t your normal real-estate agreement, some of the requirements will also be different.
In this blog post, you will find all the obligations you as a tenant may have to follow when you come into a rent-to-own agreement with a seller, and we will also explain how they differ from a traditional contract.
Rental Payment Varies in Rent to Own Home Agreements
Like any other rental agreement, the tenant has to make timely payments. However, the difference is the monthly rent payments are a bit higher in rent to own agreements. That is because a percentage of this payment is later credited towards the house’s final purchasing price.
It’s the responsibility of the seller/landlord to set aside the agreed-upon percentage. These payments also help potential buyers to build equity on the house throughout the lease agreement duration.
Tenants Are Responsible for Making Repairs on The Property
In the traditional rental agreement, the landlord was responsible for paying all the required repairs. However, when it comes to rent to own properties, the tenant has to pay for the expenses on the house repair. This obligation can be negotiated with the landlord since the potential buyer doesn’t own the house yet.
But the positive thing about having repair control is that the buyers can make all the changes and customize the house according to their taste. There are not many restrictions since the tenant will be the future owner of the house.
Tenants Should Follow Rules Specified in Rent to Buy Properties Agreement
Unless the potential buyer has availed the option to buy, the landlord still owns the property. Therefore, the tenant should also take care of all the other responsibilities aside from repair. It means not having pets over if that’s what is mentioned in the lease agreement. Also, avoid engaging in any criminal activities or doing anything forbidden in your rent to own home agreement.
In some cases, the landlord adds a clause in the agreement, where the contract can become void or null if there is any rule break from the tenant; depending on how strict the contract terms are, the tenant can lose both the option fee and the fee percentage.
Before Signing, Inspect the House
Although the tenant has the option of not buying the house later, they still should have a home inspection and order an appraisal before signing and handing over an option fee. It is suggested by experts like Stop Renting Perth because:
- The final purchase price of the house is decided at the time of contract signing; here, an appraisal will make sure the tenant is paying a fair price.
- A thorough inspection helps the potential buyers know what kind of future repair they can expect if they get into the agreement.
Is Rent to Own Home Good Option?
If properly followed, the rent to own agreement can be a good choice for both the tenants and landlords. It is great for people who want to enjoy homeownership benefits but can’t qualify for a mortgage due to bad credit. This arrangement also allows them to build equity while still having the option to walk away from the deal after the expiration of the lease agreement.
Following these instructions as a tenant will make the process easier. If you want to learn more about rent to own homes, move on to our next section, where we answer the concerns of people looking to pursue the specific agreement.
Frequently Asked Questions
What is a RTO home?
An RTO is a special kind of agreement where you can buy a house after some years of renting the same house. You’ll have to pay higher rent to the landlord, with a percentage of that amount credited toward the house’s final purchase price (decided at the time of contract signing). An option fee is paid initially as a deposit for the house.
Is renting to own a house a good idea?
Opting for rent to own homes provides an opportunity to buy a house even if you can’t immediately qualify for a mortgage. Initially, the tenant and landlord will have a lease agreement with an option to buy a house later. It gives potential homebuyers to build credit over time.
Is rent-to-own safe?
Rent to own process can be safe if done through professional companies and have a lawyer to look at the agreement. It will help avoid future problems, making the process easy and safe.
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