What are Rent-to-Own Homes- Everything you Need to Know

By: Jennifer Villalba

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Buying a space which we may call home is a dream we grow up with. However, translating this dream into reality demands sweat and blood. It takes a huge sum of capital to buy a home. Hence, the public and private sector always endeavour to ease out things for the potential buyers without compromising on the benefits of a seller. In this background, the rent-to-own home provides one such option which has something in the store for both parties: buyer and seller.

To buy a home, conventionally, a buyer needs to secure a mortgage in addition to the segregated sum of money for a down payment. Opting this deal is a far cry for many customers who eye to purchase a home.

However, a better alternative is a rent-to-own facility where you can rent a home for a while with the purchase clause at the end of the lease. Therefore, the agreement contains two parts: a standard lease agreement and an option to buy.

Following Are the Major Takeaways:

  • A rent-to-own property is a facility to the buyers where they take a rental apartment with an option to purchase it before the lease ends.
  • The agreement of rent-to-own consists of a standard lease agreement with an option to buy.
  • Lease-option is an agreement which gives you the option to buy the property without any obligation to buy it at the end of the lease.
  • Lease-purchase is another type of rent-to-own agreement which gives you the option of buying a property at the end of the lease with an obligation to buy it. You just cannot walk away without buying the property.

Nonrefundable Upfront Fees:

They say there is no such thing as a free lunch and it applies to rent-to-own homes as well. The option to buy a property is awarded in the exchange of a certain amount usually called an upfront fee. Yes, the upfront fee makes you eligible to buy the property after a certain period agreed upon in the agreement. This amount is nonrefundable which makes the whole equation interesting. If a buyer opts otherwise and moves on without buying property, he will lose the upfront fee in favor of the seller.

The fee may range between 1 to 5% of the total amount and is fixed after mutual consensus.

Here we have listed the most commonly asked question regarding Rent-to-own homes:

  • Do sellers make money from it?
  • Is it wise to rent to own a property?
  • Is rent-to-own a good way to purchase a house?
  • How to sell your house “rent to own”?
  • What are some things you can sell from home you can sell to make money?

1. Do sellers make money from it?

  • Rent-to-own is in vogue these days as buying home in a better neighborhood is becoming expensive, gradually.
  • Sellers get an upfront fee when they do a rent-to-own agreement. The upfront fee is completely non-refundable which means if the buyer walks away without buying a property at the end of the lease, he is not entitled to ask for the upfront fee. If becomes seller’s property automatically.
  • This is not the case with landlords who are supposed to return the deposit after the end of the agreement.
  • With a rent-to-own option, the seller may set a little higher rent with the placement of rental credits which are adjustable in the purchase amount at the time of buying.
  • There is no agent involved in the process which saves up 6% commission which otherwise would have been shifted to the agent’s account. You may set up a higher price for your property in exchange for a rent-to-own option.

So, it’s a win-win situation for the seller in the rent-to-own property.

2. Is it wise to rent to own a property?

The answer to this question may swing both ways: yes and no.

Why Not:

When a buyer is looking up for a rent-to-own property that means there is something wrong with his financial outlook. Either he is not able to secure a mortgage or has a poor credit history. This might be a point of concern for you as you would wish a stable and credible financial statement of the potential buyer.

Until the end of lease and purchasing, you remain the owner of the home which means a concern regarding the maintenance of the property. You might need extra scrutiny by digging deep in the buyer’s background to make sure that he will take good care of your property.

Why Yes:

As we have talked earlier that rent-to-own apartments are in demand because of an exciting offer at the end of the lease. So, it is likely to find a customer with less trouble or even host of customers to stack up the price.  You may ink down an agreement of your own will with major issues addressed in that agreement like the maintenance cast or renovation responsibility.

You get the upright fee which is nonrefundable in case the buyer opts to not buy the property.

You save up a lot of headache of being a landlord as being the landlord is a tiresome vacation.

3. Is rent-to-own a good way to purchase a house?

Buying a home with your means or arranging a mortgage is just not a walk in the park.

You are constantly grilled to find out the reason to not give you a mortgage with a strenuous work of documentation. To arrange the down payment is another harsh protocol of buying a home conventionally. Many won’t find it comfortable or don’t have the personal means to be able to buy home.

This is where rent-to-own the property becomes a viable option.

Yes, the buyer has to pay a non-refundable upfront fee but if you are serious in your conviction to purchase the property at the end of the lease, then it swings in your favor.You may have a hard negotiation in setting up a marginal upfront fee and pull it in your favor by lowering it down as well.

You get the chance to live in the place which you are finally going to buy and grow up a sense of attachment. That feeling may get instrumental for you in arranging money you require at the end of the ease to own a property.

There are pros and cons of every possible opportunity. You need to weigh in your strength and weakness. That shall be the needle of your compass when you make a wise decision.

4. How to sell your house “rent to own”?

To sell your home, do an advertisement at all the available platforms you might get to know. You may advertise on a personal level or can take services of any company.  There are plenty of customers out there in the market seeking for the rent-to-own property.

Look for the Right Terms:

Try to enter a lease-option agreement rather than a lease-purchase agreement to serve your end best.

Get Help from a professional:

If you have decided to sell your apartment on rent-to-own offer, then taking professional help is the best idea. Try to learn the details of legal issues and know your obligations and rights beforehand. It is also helpful in negotiation to know your stakes before striking a closing deal.

5. What are some things you can sell from home you can sell to make money?

If one thing we are sure about life is that life is uncertain. You might be living your dream life and out of blue one unfortunate incident may usurp your life beyond your calculations.

There might be a reason for poor management of your resources behind your cash flow crisis or it could be an emergency you just encountered. So, it is always better to know how to come out of that emergency unscathed. Here is a list of things you can sell from home to offset any situation.

a ) Books

Books are your best friend; they are, certainly. You always get your hands on the title which attract you randomly lying in a shelf near the door in stores. They give you company when you are lonely and they might help you a bit in need with money.

There are dozens of online platforms where you can sell your books to make money out of that.

b) Furniture

Next on the list is your old furniture. We always keep renovating our home and upgrade our furniture as well. Old furniture just makes it to the basement or store. Lying there, it is good for nothing. It might be interesting for you to know that people like to buy old furniture. It gives a sense of antique and serves its aesthetics well. So it is a good idea to sell your old furniture. It will certainly make you more money than books.

Craigslist is one option and also you may find local customers as well and that will save you a lot of trouble. You may post pictures online and on related forums as well.

c) Clothing

We live in a consumer-based capitalistic market. So buying clothes just goes with instincts. Our closets are always full of fancy clothes we might have worn just once on a friend’s wedding.

If you aim to make money by selling clothes then Sites, such as Poshmark and Tradesy are better options. Check out The RealReal, if you have a more fancy collection. Most of the items won’t bring much in term of money but if you have designer’s items then you might find a handsome amount in return.

d) Sports equipment

Parents always cherish the idea if kids ask for sports items. Kids keep changing their interest and room gets full of sports equipment. Play It Again Sports is a national chain provides the services of buying unwanted sports items. You may also enlist the gears you want to sell on SidelineSwap. It might save you money to pay the tuition fee of your child.

e) Scrap metal

People make fortunes out of scrap metal business. It might not be the case with you but chances are that you will save up pretty good amount by selling metal scarp lying in your basement for no reason. Copper is especially expensive which makes a major chunk of old electronic devices. Old appliances like, kitchen pans, metal patio furniture, construction materials, or even aluminium cans in your home or garage can be sold for scrap as well.

f) Kids toys

Kids are guilty of buying next-in-market toy before even making the best of the old toy. Kid’s toys once outgrown are destined to the trash. However, if the toys are in good condition, you might bet your chances of selling them in the market. Social media assists in that case as people prefer to buy directly from the owners.

g) Jewelry

Accept that, we buy more jewelry than their expected utility. Jewelry hardly fit into our daily lifestyle instead is more of a code of formal functions. We buy them as we have resources but in time need, they may also get you out of trouble. Extra money can be made by selling rings or other jewelry that is not in use. There are little chances that you will get as much as you paid for them initially so try to be a harder negotiator when selling your jewelry.

h) Vintage stuff

Aesthetics play a big role in our life and classic items are always intimidating. People who have that touch offers handsome amounts for any vintage piece.

There are good chances that you will encounter buyers of vintage stuff on sites, such as Etsy and eBay. And if you can be patient in striking a deal, you may get away with a lofty amount as well.

When in need, selling anything makes sense but it is better to get rid of things which are taking space for no reason.