Before signing a rent-to-own agreement, it is important to understand how they work in general. These contracts typically include all the usual provisions one might see in a residential lease agreement plus a section or two specifically about purchasing the rental premises. This section will often require the tenant to pay an upfront fee called “option consideration” and in return the tenant receives the option to purchase the premises at the end of the rental term.
Next, the agreement will detail how much and exactly what the tenant needs to do in order to purchase the property. Normally only a percentage of each rental payment will be credited toward the eventual purchase of the home. Often, nothing will be credited if rent is paid late. Tenants may also have more maintenance responsibilities than in typical residential leases since they might eventually own the home. Try to find where the agreement specifies who is responsible for maintenance and paying certain utilities.
Lastly, there should be a part that specifies how the tenant is to close the deal and the final steps that need to be taken by both parties.
Next, you need to understand that every rent-to-own agreement is written differently. Some may be missing the standard provisions mentioned above. If this is the case, consider negotiating with the landlord to change parts of the agreement. Although some landlords don’t like to do this, remember your own value. Tenants who sign rent-to-own contracts are great assets for landlords because they are typically agreeing to a longer rental and take better care of the property. Therefore, don’t feel too nervous about insisting on how you want certain provisions to look. After all, this is a big decision for you.
When determining whether a rent-to-own lease agreement is right for you, consider what your income situation will look like in the future.
Usually, it is the buyer that will be required to finance the home purchase at the end of the contract term. Will you be able to find financing at that point? What happens if you can’t, and does the agreement say you will get some of your money refunded?
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