Rent to own homes also known as a lease option or lease to own is effectively a real
estate agreement which consists of a rental lease and a purchase agreement where the tenant has the option to buy the property at an agreed upon price at some point in the future. The rent to own agreement is similar to common rental agreement or lease agreement where the seller (aka as the lessor in legal ease ) allows the buyer ( aka as lessee in legal ease ) to occupy the property in return for a monthly payment. The option to buy the property is usually at a pre determined price for which the property is to be purchased and the time frame during which the buyer/tenant is able to exercise that option to purchase the home.
The potential buyer is usually required to pay an option fee which is generally more than a deposit if you were simply leasing the home. This fee in the event the option is exercised is normally applied to the purchase price however if the buyer chooses not to buy or is unable to buy for any reason then the option fee is normally non-refundable.
Rent to own homes become more popular during real estate market downturns as sellers may need to vacate a property before it is sold and do not want or cannot afford to make 2 payments. Often times a seller will give rent credit to attract potential buyers as a way to move the property more quickly. This is also good for potential buyers looking for rent to own properties as it gives them time to rebuild their credit and provides them the ability to move into a home more quickly.