Avoid the Pitfalls of Rent to Own Houses
Avoid the Pitfalls of Rent to Own Houses
Avoid the Pitfalls of Rent to Own Houses
Rent to own houses have grown in popularity today. There's a reason for this: Mortgage lenders have tightened their lending standards, and the average credit score of consumers' has fallen. Rent to own houses, though, give credit-strapped buyers the opportunity to eventually purchase a home. They also give homeowners, who can't nab high-enough prices by selling their homes in today's down economy, the chance to earn at least some rental income from the houses that they can't unload.
But rent to own houses do come with their own risks, and it's up to the renters themselves to do the advance research that will help them avoid these risks.
Minnesota Public Radio recently ran a report on the booming rent to own market. The report said that while this market provides opportunities to both homeowners and hopeful homeowners, it also comes with potential pitfalls. The biggest problem, according to the story, is that rent to own arrangements are largely unregulated by government agencies.
Rent to Own Homes: An Unregulated Industry
State lawmakers in Minnesota are now working on legislation that would provide regulations for owners and renters entering into a rent to own agreement. But even if this legislation eventually passes, participants in rent to own agreements in most of the rest of the country will still have to navigate the process without the benefit of regulations.
Renters, then, who don't want to fall into disputes with their new landlords, need to clarify the exact terms of any rent to own agreement in which they enter.
At their most basic, rent to own arrangements are relatively simple. Renters sign a lease, much like an apartment lease, to rent a house for a set period of time, usually a year. After a certain period, it could be as long as three to five years or as soon as the end of the first year-long lease, renters have the option to purchase the home that they had been renting.
Along the way, landlords reserve a portion of each month's rent for a possible down payment should the renters decide to purchase the home.
The Benefits of Rent to Own Houses
The benefits of this arrangement are obvious: Homeowners earn rental income, and also secure a potential buyer for their residences. Renters learn what it's like to live in a home and gain the time they need to improve their credit scores.
The potential pitfalls, though, are serious. The Minnesota Public Radio story, for instance, highlighted the case of a couple who were in a rent to own arrangement. When their house fell into foreclosure, the couple lost all the extra money they had set aside for a possible down payment. The couple also had disputes with their landlord over who was responsible for making major repairs with the house, the landlord or the renters.
The key to making a rent to own arrangement work is for both homeowners and renters to spell out exactly what is expected of everyone. Homeowners should explain exactly how much money they'll be setting aside for a possible down payment from every rent check. They should also clarify what happens to this money if renters decide not to purchase the house or if the house falls into foreclosure. Both parties should also agree about who is responsible for repairs, lawn mowing, and other upkeep.
The Rent to Own Alternative
Rent to own houses can serve as a much-needed alternative for both homeowners and renters in today's challenging real estate market. But unless both sides of the rent to own agreement are forthright with what is expected, the rent to own arrangement can lead to a long, and unpleasant, dispute. By doing their research before signing any papers, renters can take a huge step to avoiding such a negative situation.
Buy Foreclosure Houses: Securing A Smart Investment Chesterfield Sofas: Add Style to your house! Houses over Modern Types of Housing in the Philippines Beginners Guide To Foreclosure House Auctions Modern and Traditional Housing in the Philippines Need of Bed and Breakfast Guest Houses Vintage Oak Household furniture - Your Total Guidebook to the Greatest Oak Furniture California House loan Laws - Notice of Trustees Sale Professional Mortgage Advice Crucial As Confidence Falls in the Housing Market Five Reasons For Rural Households to Switch From Dial-Up to Satellite Internet Reasons Why Houses are still In-Demand in the Philippines Advantages of Traditional Houses from Modern Housing Courthouse meals for in-custody accused persons