REAL-LIFE ADVICE ABOUT RENT-TO-OWN PROPERTIES

June 12, 2009 at 9:12 pm Leave a comment

I recently came across a renter who was looking for a “rent-to-own” property. The renter wanted a home with specific features, including at least four bedrooms and three baths in within a specific two- to three-square-mile area.

My initial reaction was, “you’re not going to find anything.” Not only is it rare to find a seller that would allow a “rent to own” arrangement, it makes it even harder to find one within a small area and boasting four bedrooms and three baths. Especially because most homes with four bedrooms have two-and-a-half baths, not three. My gut feeling was confirmed when I found zero listings on the MLS using the specifications the renter wanted.

In most cases, a seller would consider a “rent-to-own” arrangement only if the house is hard to sell — either because it backs up to or fronts a busy street, needs major repair, has a dysfunctional layout, etc. And renters are interested in a rent-to-own to allow them time to improve their credit.

In a rent-to-own situation, the seller agrees to rent the house to the renter, who will have the option to purchase the house at the end of the option period, which is anywhere from one to three years. The renter pays an option premium (which in most cases, is not refundable) to secure the right to the option. The price of the house is determined today and the purchase is exercised a few years afterwards. Many times, a rent-to-own agreement does NOT successfully result in a sale to the renter. The renter and seller’s situations can change during the waiting period and they can decide to cancel the contract.

The lessons learned here are:
1. Don’t be choosy when you are looking for a rent-to-own home.
2. The rent-to-own agreement is complicated and has a high failure rate.
3. Be prepared to get legal council if you choose to go this route prior to signing any contracts.

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Entry filed under: Arizona Real Estate, Chandler Real Estate, Foreclosures & Short Sales, Phoenix Real Estate, Real Estate Deals. Tags: , .

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