Renting-to-own can be a blessing if you long to own a house, but simply can’t afford one right now. Still, smart buyers like you should approach the process with reasonable expectations and a level head. Here are some few solid strategies to get the most out of your contract and land the best home possible.
For an important decision like signing a rent-to-own agreement, you’ll sleep a lot better at night by hiring a lawyer. A good attorney will do one very important thing—read your contract.
We don’t mean to insult your intelligence. But hiring a professional is the safest way to avoid being taken advantage of by a scheming homeowner (which does sometimes happen, unfortunately). Your attorney makes sure the contract is sound and, if it isn’t, can even write up a new one.
And speaking of your contract…
Almost everything is negotiable if you just ask. And just like you negotiate during the traditional home-buying process, so should you with your rent-to-own contract.
Did the seller fill your contract with questionable fees or stipulations? Ask to take them out. One of the biggest prizes to be won negotiating is the total amount of your rent that goes towards your down payment. Obviously, the higher the better…but you won’t know how high unless you try.
How do you know what a “good” number is?
You wouldn’t buy a car without comparing prices at different dealerships. On the same token, you shouldn’t assume that the terms in your contract are “market value” or “industry standards.”
Your landlord knows more about the house than you do. The best way to level the playing field is to have an independent appraiser thoroughly examine the house and give you an honest estimate of its worth.
Not only that, but a pro can easily spot wear and tear (and other hidden, more severe problems) better than you can. It’s too easy to overlook minor issues when you’re excited about moving in ASAP.
You might also want to examine listings for similar houses in the area, making note of how much they sold for. Plus, it’s good to follow market trends to the best of your ability—you want to know whether your lovely new home is going to appreciate or depreciate in value while you’re saving up for a down payment.
Alright, so you’re ready to sign the contract. Here are a few more things to keep in mind.
Many renters make the mistake of assuming that:
These are both false. Under a rent-to-own agreement, you are not yet considered a homeowner. Buying your own renter’s insurance makes sure you’re not left out in the cold on the off chance of a fire or burglary.
Don’t forget to ask yourself…
If you’re 105% sure THIS is where you want to spend a huge chunk of you life, you’ll want the longest option period possible.
The longer this time frame, the longer you have to save up for the eventual purchase of your new home. On the flip-side, if you do decide to leave the house early, you wasted even more money in the process.
Sellers generally want shorter option periods so they get paid faster…so don’t be too demanding. This is a two-way street.
And once you’re moved in…
The majority of rent-to-own contracts void that month’s rent credit on a late payment—even one just a single day tardy.
On top of that, your future lenders will view late payments made under your lease-option agreement even worse than normal. That means when it’s time to buy your house, it will be tough getting a favorable interest rate.
Rent-to-own agreements can be extremely useful to the right buyer under the right circumstances. As long as you’re extra-diligent and cover all your bases, you shouldn’t run into any issues…and you’ll be on your way to owning the home of your dreams faster than you thought possible.