Rent to Own Contracts – What Buyers Need to Know!
People often get confused as how a rent to own agreement works. Since most people considering entering into a rent to own contract have never done one before, this is of no surprise.
How Do Rent to Own Contracts Work?
When you get a rent to own home, you are actually renting the home for a specified period. Before the end of specified time period you will have the option of purchasing the home. During the contract period the owner cannot sell the home to anyone else.
You are not forced to purchase the home, you have the freedom of not to purchase the home and no legal action can be taken against you. You are free to leave once the agreement has expired.
You will have to pay an upfront option fee to get the exclusive option of purchasing the home. Generally this upfront payment is 2% to 5% of the agreed price of the home, but this amount can vary from home to home and from state to state. This fee is not refundable if you decide not to purchase the home.
A portion of your payment is credited towards the purchase price of your home on a monthly basis. This is called your rent credit.
While renting to own can be a great way to achieve your goals, you should have a through understanding before you sign a rent to own contract. Specifically, you need to make sure that the current hoem owner is actually interested in your success. There are many “investors” and a few home owners that intentionally structure contracts in a way that prevents the tenant buyer from ever purchasing their home. They do this because what they want to have happen is for you to move out so that they can repeat the process with someone else. Good signs that they are not serious about selling include a short term and a lack of interest in your credit repair efforts. Additionally, a price that is way out of line with the market can be a sign that something is wrong.
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