(Closed) Rent to own /Lease-Purchase Option

posted 7 years ago in Home
Post # 3
Member
1042 posts
Bumble bee
  • Wedding: May 2010

I don’t have any info, but I am also interested if anyone has done this or knows of a good starting place. 

Post # 5
Member
6009 posts
Bee Keeper
  • Wedding: May 2009

We were considering a rent to own option a couple years ago.  The house we were interested in had been on the market for a while, and had several price drops, so we approached the real estate agent with the possibility of a rent-to-own agreement.  The buyer agreed, and we started going through the preliminary paperwork before backing out.

Rent to own can be a great option, but it also comes with it’s draw backs.  For one, the purchase price is negotiated months to years before the actual purchase.  That’s great if you’re in a rising real estate market because you can lock in a good price, but bad in a falling or stagnant market because you may pay more than you would have had you waited.  Also, not all the money you are paying in “rent” goes toward the home/down payment.  At least in California, the seller’s deduct what they could’ve gotten from a renter from your monthly check, and only the difference goes toward a down payment.  In the end, we would’ve only been paying about $300/month toward a down payment, which is practically nothing.  And considering most rent to own agreements last less than 2 years, we would’ve had maybe 7k toward a down payment by the time we had to purchase the home.  The other thing that swayed us is that the majority of rent to own homes are sold “as is” and that seller’s have more rights/options to back out of the agreement than the buyer’s do. 

Post # 6
Member
1042 posts
Bumble bee
  • Wedding: May 2010

Mrs. Spring, if I may ask, why did you opt not to do a rent-to-own in the end? I know you listed off some reasons, but did you just not want a house as-is, or did you decide to save for a larger down payment?

Post # 7
Member
4137 posts
Honey bee
  • Wedding: May 2011

spring has great info. if you decide to rent-to-own, make sure your contract has the OPTION to buy at the end. you don’t want to be locked in to buy a house in 2 years because you never know what circumstances will change, so you need to give yourself an out with no penalty.

Post # 8
Member
6009 posts
Bee Keeper
  • Wedding: May 2009

The main problem was that we wouldn’t be able to save a down payment if we did the rent to own option.  I think we negotiated the house price down to 425k, and we were expecting to pay 3k/month in rent, but only $300 of that was going toward a down payment (since comps in the area were renting out for $2500-$3000/month).  We stayed at the place we were currently renting for half that price, and ended up getting a foreclosure about 6 months later.  The house we bought is about 2/3 the size of the rent to own place, but it was only half the cost, so we got a pretty awesome deal.

Post # 9
Member
6009 posts
Bee Keeper
  • Wedding: May 2009

Adding to kitzy’s post:  We were successful in negotiating an optional buy at the end of the rental period, but typical rent to own contracts will not force the sellers to return any money you put toward a down payment during the rental period.  It’s my understanding that any money you put toward the home is basically lost if you do not purchase the home at the end of the rental period.

Post # 10
Member
4137 posts
Honey bee
  • Wedding: May 2011

@Mrs. Spring:that’s right, they won’t return any down payment money if you don’t buy. i’ve seen contracts where there’s an additional penalty for not buying though, like still owing half the down payment. definitely don’t sign anything like that!

Post # 11
Member
6009 posts
Bee Keeper
  • Wedding: May 2009

@kitzy:  Oh that would be way worse!  We didn’t have a penalty like that in our agreement, we just wouldn’t have gotten any of our money back!

Post # 13
Member
3947 posts
Honey bee
  • Wedding: October 2011

I’m currently looking into this option.  We’re mainly considering it because we won’t have enough money for a down payment for many many years.  I thought this would make sense…but if they upcharge the rent I guess it wouldn’t…

any one else have any experience/luck?

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