Rent-to-Own Deals

Rent-to-Own Deals: Smart Questions to Ask
Sellers who can’t unload their properties through a conventional sale are proposing rent-to-own deals more frequently these days.

For sellers, the advantage of rent-to-own is the likelihood that the renter will eventually permanently take the property off their hands. For buyers, rent-to-own can provide the credit-challenged or cash-strapped a route to homeownership.

But for buyers and sellers, there are also many potential drawbacks. If your customers are considering a rent-to-own deal, here are some smart questions they should consider.

For Sellers:

Who will tend to the property and pay for routine maintenance?
Who pays for major repairs?
What are the costs of setting up and managing an escrow account for the portion of rent allotted to the down payment?
Will you manage the property yourself, or hire an agent?
What if the renters change their minds? Who keeps the money in the escrow account?
If the buyers change their minds, what will be required to put the property back on the market?

For Buyers:

How much of the rent is going to the down payment?
How locked in are you if change your mind? What will it cost you to get out of the deal?
How long will it take to accumulate enough of a down payment that you are likely to qualify for a mortgage?
What happens if you don’t qualify for a mortgage by the specified deadline? Can you continue to rent?
Who will be responsible for routine maintenance?
Who will pay for major repairs?
Do you hope to strengthen your credit rating by paying rent on time? If so, will the owner report your good habits to credit bureaus?

Source: Milwaukee Journal Sentinel, Joanne Cleaver (09/22/07)

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