Rent to own house basically a way to buy a house by renting. Renting before buying are just for few years, in these years, a part of your monthly rent payment added to your final purchase amount as down payments. At the end of agreement period, you have option to buy house or demand for a mortgage.
Rent to own house is extremely profitable for both parties, but not for everyone.
Every states have their own laws regarding rent to own agreements and sometime deals settled up that buyer and seller likes. Both parties on each side agreed on a price to purchase the house.
But as we know that market rising day by day and seller convince buyer to buy house more than this current year value. Some seller up-rises the price at the time of the purchase.
Buyer should pay the upfront cost when agreement signed. Its cost vary from 3% to 10 % of the sale price. Buyer should negotiate the option, purchase and monthly rent from the seller while agreement.
Pros of rent to own:
- If buyer loves a house, and he confirms that on one can buy this house except him. So he rent to own provide him a path to do so.
- A new buyer can try the house and neighbourhood before buying it.
- He can lock the price of house, no increment should take place in future.
- If he don’t want to purchase house at the end of the agreement, some states agreeing give them this freedom also.
Pros of rent to own:
- Potential buyer not only just to pays the option but also above market rent, otherwise he can’t qualify for a mortgage.
- If they are unable to pay rent, it may lose value too.