Rent-to-Own Homes: Mistakes to Avoid 

by Kristen White Blogger Rent-to-own homes, or lease option as they are commonly referred, can be a great idea if you need to buy a home as soon as possible, but can’t find financing.

Rent-to-own homes are common these days. You cannot miss them when researching homes. This is because they are an appealing option for many people. The rent-to-own model allows people to own homes without the financing stress that’s always associated with buying a traditional home. The simple fact that someone can get the keys handed over to them without breaking the bank makes these homes an appealing option to many.

If you are looking for rent-to-own homes in Calgary or any other town, it is essential to understand what they are and what the process involves to avoid the common pitfalls. This article will simplify it for you to help you get started.

Understanding lease option
At its most basic, a lease option is an agreement that involves both rental and purchase contracts. The landlord and the buyer determine the upfront price that will be paid for the house, and the buyer will complete the purchase later on if everything goes as planned.

Since the landlord (seller) allows you to buy the house in the future at today’s cost, he or she will need an above the market rental rate, a substantial option fee, and sometimes, both. A lease option will feature the following elements:

Option fee: this is the payment that you pay upfront, and serves as you down payment in case you complete the purchase
Purchase price: is the amount you will pay for the house when close when you are ready
Term: is the duration that the contract will last – or the amount of time you have to finish the purchase
Rent credit: is the extra above the market rent that you pay, and also adds to your down payment in case you purchase the property
The contract will also feature rental provisions like:
Parking, noise or other behavior rules
Premise modification, roommates and pets approval
Penalties and rent due dates

Mistakes to avoid
Wording your contract incorrectly
When writing your contract, you should ensure that the words articulate correctly. Otherwise, your future mortgage lender may turn you down, since they may not acknowledge the down payment that you’ve amassed over time. You should word your rental and purchase agreements correctly and keep all records safely.

Working with predatory sellers
Not all rent-to-own sellers have your best interest at heart. In fact, some don’t even want you to complete the purchase. Unscrupulous sellers may add clauses that allow them to cancel the contract and keep your entire down payment if you are late for one payment. So, it's in your best interest to do thorough research beforehand and ensure you settle for the right seller. You should also take the time to read and understand the contract well before signing the dotted lines.

Not hiring a lawyer
Lawyers have a keen eye for detail. They can spot clauses that work against you with ease. That’s why it's essential to involve them in your dealings. A good lawyer will also help you with drafting an effective lease option contract that will be future-proof.

Conclusion
Rent-to-own homes in Vancouver offer the easiest and most convenient way to own a home. However, you need to be careful so as not to fall prey to the unscrupulous sellers.

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Created on May 29th 2020 00:26. Viewed 217 times.

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