3 Reasons to Avoid Private Rent-to-Own Deals
Many home buyers consider using rent-to-own for the purchase of their home. While working with a rent-to-own company could provide you with a good experience, working with a private party can cause problems. Here are a few reasons to avoid private rent-to-own deals.
1. Repair Issues
One of the most common problems that people are the repair issues. When you are renting to own a property, there is a gray area when it comes to completing repairs or updating a home. The gray is due to the landlord viewing the home and it's needs, as your responsibility. However, you may see it differently because you do not own the house yet. If the details of who will handle repairs are not spelled out clearly in the contract, this can cause serious problems for you in the future. Many people have been stuck with large repair bills that they did not anticipate. Buyers that do not regularly engage in these deals may not know how to handle the situation properly.
2. Foreclosure Issues
Another reason that you should avoid dealing with individuals is that you are at an increased risk of foreclosure on the property. Most of the time, in order to secure a rent-to-own deal on a property, you have to come up with some option money upfront. This money reserves the right for you to purchase the house at some point in the future. In addition, a portion of your rent payment will typically go towards the purchase of the house. Therefore, by the time you get to the point of purchasing a house, you typically have thousands of dollars invested in the property.
The problem with this is that the landlord can take your money, and not pay the mortgage. Then, the house could go into default, and eventually foreclosure. Many people think they are paying for a house that they will buy. However, unless the landlord lives up to their end of the bargain, the house could end up in foreclosure and will end up with the bank.
3. Other Buyers
Another problem that many people have ran into involves other interested parties or buyers. Homeowners are generally interested in unloading a property as quickly as possible. Even if they agree to a rent-to-own scenario, they may continue looking for other buyers. They might then come to you and tell you that someone else has offered more money for the house and they want to sell to them instead. This could result in you losing the house that you have been paying rent on for some time.
The best way to avoid this is to solidify your purchase price in writing. Begin by establishing the time frame for the purchase, for example give yourself a year or two. Then, be sure you have the first right to refusal. This right gives you the right to say no, but, still allows you to be first in line for the purchase.