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Rent-to-own homes - What you must check before signing a contract

What you must check before signing a Rent-to-own home contract

Rent-to-own is also called as a lease option. It is a legal contract by which a renter can lease a property and when the lease ends, the renter can purchase that home at a price that was fixed previously.

The perfect buyers for a rent-to-own option are those people who wish to purchase a home but don’t have enough money for paying a down payment. So, you must be wise enough to sign a rent-to-own contract being a renter.

There are several terms and conditions in a contract which you should understand while taking the lease option.

Here are few important things you, the renter, need to know before signing a rent-to-own property:

1. You must calculate the fair sales price

Under a rent-to-own contract, you'll have the option to buy the property after the period stated in the contract. So, you must calculate the proper sale price that'll suit you at the end of the lease.

You can also purchase the home at any point of time during the term. The price will be locked in as per the contract. You'll be benefitted if during the lease time the home value goes up.

On the other hand, you could end up losing your money if the value of the property decreases than the price you've locked in at the time of signing the contract.

2. You must opt for inspection and repairs

Initiate a home inspection and note down any required repairs. As at the time of signing the contract, the condition of the home must be reflected in the sale price.

Take required snaps of the repairs and document all the copies.

3. Pay the rent

At the initial stage of the contract, the renter gives the seller a predetermined amount of money as monthly rent. The lease term will be negotiable, but normally renters prefer 1 to 3 years contract.

In many contracts, a percentage of each monthly rent payment is applied toward the purchase price.

Sometimes, the rent charged by the seller may vary from the current market rate, it may be little higher.

4. Check out for any liens

Look out if there are any liens against the home that is listed in the contract, if any, that will affect the home purchase. You might want to avoid any problems at the time of buying the property.

5 . Check for the exit clause

Make sure it is properly mentioned in the contract that what will happen if you don’t want to use your option and refuse to buy the property at the end of the lease term.

6. Pay other costs

Make sure all other important costs are paid in full at the time of buying the property. Check out whether the mortgage documents, tax bills and insurance papers are properly maintained; you may need them in the future.

7. Expert advice

Each time you go for a rent-to-home option and purchase a real estate property, it’s wise to consult a professional to help you navigate the process and protect your interests.

Someone expert in rent-to-own contracts can help you to note everything in writing. As a result, being a renter you can understand the contract clearly and win the jackpot.

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