Rent to own home deals might seem like a great deal. You pay rent and build up a down payment at the same time. What’s not to love?
Unfortunately, there are many scams out there. Homeowners that know they ‘got you’ with their sweet deal to rent to own the property might offer what sounds too good to be true. Chances are that it is too good to be true and you should run the other way.
Does this mean there aren’t any legitimate deals out there? Luckily, there are many ‘good deals’ out there. You just have to weed through the scams to get the deal that works for you.
Do Your Research
In order to prevent falling for a rent to own scam, you have to do your research. We recommend you start by talking with a real estate attorney. If he knows the area well, he will know the most common terms for rent to own properties in the area. You may also want to consult with a real estate agent. This can be your resource to help you find the perfect property to rent and eventually own.
Once you know what to look for in a contract, you can start shopping for a home. Ask the owners what requirements they have to become an owner after renting the home. You should know the following:
- Average rent for the area – This is one of the first signs of a scam. If a homeowner seems to be asking ridiculously low rent for the area, it’s likely a scam. Rent to own properties usually have higher than average rent prices because a portion of your money goes towards your future down payment.
- Who owns the property – This is where your real estate agent or attorney will help tremendously. They can run a quick ownership search on the property to make sure the person that claims to own the property truly is the rightful owner. If they aren’t the owner, they don’t have the right to rent it or sell it to you.
- Upfront fees aren’t necessary – If a homeowner claims you have to pay an application fee or a viewing fee to see the home, it’s likely a scam. Rent to own properties are just like standard rentals, with the exception that you have a clause in your contract that allows you to buy the home by a specified date if you choose to do so. There aren’t extra fees that anyone needs to charge.
Start Shopping for a Rent to Own Property
Once you know what to look for, it’s time to start house hunting. This isn’t much different than hunting for a house to buy. In fact, you’ll want to be even more particular in this situation since you will likely rent for a few years. Stop and think about your current and future needs. Do you plan to grow your family or downsize? It doesn’t make sense to rent a home that won’t suit your needs when it comes time to buy it.
Remember that any money you pay ‘extra’ towards your down payment becomes the landlord’s money if you don’t buy the home. This is the landlord’s compensation for keeping the home off the market while you rented it. If you decide not to execute your ability to buy the home, the landlord keeps the money and then finds different renters or buyers for the home.
You can use a realtor to shop for a home. This often gives the best options when searching for a home. Realtors often have ‘inside information’. They know their sellers and know which ones might be willing to work out a rent to own situation. Sometimes sellers are not even thinking about renting the home out but are willing to do so after talking with their real estate agent or even yourself. If you have a good enough deal to offer them, they may be willing to take it.
If you can’t find a home to rent and eventually own on your own, you may subscribe to sites like RenttoOwn.org. Sites such as this may help you start the process of finding homeowners that may be willing to become landlords. Many of the homes on the site are listed as ‘for sale by owner,’ but the sellers list them on the site to open up negotiations for a rental situation. This isn’t a guarantee that the homes you find on this site will be a rent to own home, but it can start the conversation for you.
Finding the right rent to own home is a delicate process because you are dedicating money to a future purchase that might or might not work for you. Make sure you give careful consideration to all aspects of the process to make sure it’s the right step for you.Click to See the Latest Mortgage Rates»