Rent-to-Own House Advantages and Disadvantages for Sellers

A few years ago, you hardly heard the word rent-to-own in the real estate market. But now there are so many homes in the market and these are rising. There are no exact terms for these contracts. Generally renters and the property owners sign contract with mutually acceptable rent for one to three years. The rent paid by the renter is usually higher than normal that compensates the down payment. At the end of the period, the renter will pay the final amount to get the ownership. The rent-to-own contract has some advantages and disadvantages to the sellers.

Advantages: Advantages with the rent-to-own house to the sellers are as follows:

  • If the seller was taken a mortgage on the home, he has to pay the interest for the mortgage. In the rent-to-own method, the property ownership is not transferred to the buyer until the final payment. So, the seller can deduct the tax for paying interest.
  • The sellers can enjoy the benefit of non refundable option fee when the buyer is not willing to buy the house at the end of the contract. This fee has to be paid to the seller. It will be helpful to the seller to reduce the risk when the buyers defaults with respect to agreement, or walks away from the deal.
  • The real estate agent’s commission on a sale of home can be thousands of dollars in total. The sellers can avoid to pay the commission to real estate agents if they choose for rent-to-own option. As well it is easy to find a good buyer to sell the property quickly.
  • When seller opts for this option to sell the home, many buyers are attracted because of financial terms offered are good. It even allows time for the home buyers to get the credit or finances. These are the advantages to the sellers to command a good price even in tough market conditions.
  • Rent-to-own option provides an advantage to the sellers to avoid the vacancies in their houses. Once they are advertised for selling a home in this way, buyers will come quickly and choose one them to enter the contract.

Disadvantages: Disadvantages with the rent-to-own contract to the sellers are as follows:

  • The rent-to-own contract do not bind the buyer or renter to buy the property compulsory, and they may opt to out from buying the property at the end of the period. In this case the seller again need to start the selling process from the beginning.
  • This option may give less profit than the traditional method of selling.

A lease agreement includes rent amount, length of the leas period, rent credit for down payment terms, responsible persons for home owner fee, insurance, property taxes, repairs, maintenance and utilities during the lease period. It is sensible to review with a lawyer because multiple issues have to be addressed.

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