There are several ways to reach a mutually advantageous agreement with a home seller and become the proud owner of your new dream home. Let’s take a look at one of the most underappreciated methods for buying a home in Clearwater by examining the benefits and drawbacks of a rent-to-own agreement:
Pro: Lowered Requirements
When looking to rent to own a home, you’ll find that your credit score has less of an impact on things since you aren’t taking out a large loan.
You will, however, be required to pay a non-refundable choice, or premium, fee of between 2 and 7% of the negotiated purchase price of the home. Furthermore, the ebb and flow of the real estate market may mean that the house appreciates significantly while you’re renting it, and you may come out ahead if you decide to buy it.
Con: Harder to Build Equity
You’ll be paying your monthly rent plus a rent credit while you’re still renting. Rent credits are a portion of your monthly payment that is applied to the purchase of your home in the future.
As stated previously, option fees are non-refundable and the same goes for rent credits.
A monthly payment is made by someone who has purchased their home entirely, with a portion of that payment going toward the principal of their mortgage. This helps them to steadily create equity in their property.
However, until you buy the property from the owner, you aren’t necessarily accumulating equity while renting it. You lose any potential equity, as well as the option fee and rent credits, if you decide not to buy the home.
Pro: Legal Protections
Any rent-to-own agreement should be reviewed by a real estate attorney to ensure legal protections for all parties.
The attorney will be able to identify parts in the contract that are missing or incomplete, allowing both the buyer and seller to make changes to their mutual agreement. Having a legally enforceable contract in place provides both peace of mind and practical solutions to most disputes.
Con: Liability Still Exists
Your finalized rent-to-own papers will hopefully cover any foreseen complications, but the contract does not eliminate the possibility of legal action in the future.
One party may decide to challenge a provision of the contract at some point, which could result in a costly court battle. One of the main reasons we recommend having a real estate attorney go through your rent-to-own agreement before anyone signs it is to prevent this from happening.
Just because you decide to enter into a rent-to-own agreement does not mean you will absolutely be required to purchase the home if you change your mind.
You could live in the house for a year before realising it has serious faults that require costly repairs. Perhaps the neighbourhood is unsuitable for you in some way.
As long as your rent-to-own agreement does not lock you into a specific path into buying the home without any way to back out, you will have the option to walk away.
Con: Less Freedom
Renting someone else’s home can mean they maintain majority control over the property until it is purchased by you.
You could be required to repaint using specific colors, or you could be barred from making changes to the landscaping.
When you buy your home, you have the freedom to shape it in your own image, but you might not be able to do so if you’re still renting. It all boils down to the terms of your rent-to-own arrangement and the seller’s flexibility in the end.
Buying a House with a Rent to Own Agreement in Clearwater
Contact us immediately at (813) 993-0520 if you’re looking to buy a house in Clearwater through a rent-to-own agreement!