If you are looking for a new home, it can be a tedious process finding the best one for you. In addition to finding the home that is perfect, homeowners are faced with other difficult decisions. One of the more difficult and timely decisions is whether a person should rent, own or rent-to-own the house of their choice. Since many homes and condominiums are not given the choice between all three, it becomes pertinent for a person to know what they want to do so they know which homes and condominiums are perfect for them.
You have decided that it might be time to rent-to-own, giving you the better of two worlds: renting and owning a home. Like all decisions made, you must evaluate all the pros and cons and weight them carefully to come up with a consensus best for you, your family and monetary situation. The pros for rent-to-own are as followed:
- A person is able to try the home before they decide if they want to be locked into a lengthy commitment with the home and, for some, the neighborhood as a whole.
- Rent-to-own begins with a rental, supplying a person with the opportunity to save up for a considerable down payment and build better credit.
- Rent-to-own allows a person to lock in sale prices within a few years after renting it, giving them a much lower market price for their home.
Rent-to-own, while it has its benefits, also has its downfalls for many homeowners. When deciding if rent-to-own is for you, you must consider the following cons:
- Not all of your monthly rent will go toward your down payment. In fact, a vast majority of it will go to the homeowner dependent on your contract with a homeowner or mortgage company. Many homeowners will forge a contract with you where rent will be raised $250-$300 and by the end of your lease, you will be refunded back the total amount for a sizeable down payment.
- Upon signing the above contract with a homeowner, you will be only be refunded the money if you determine you want to purchase the property. Therefore, if you do not want the property, you simply paid $250-$300 more per month than required in the original terms of agreement.
- For sellers of a rent-to-own, if a buyer decides he does not want to purchase the home by lease-end, you will be forced to relist your home again on the market. Re-listing homes can be costly and you could have missed several potential buyers in the time the renter was considering your proposal during their rental lease.
- Sellers are also faced with the sudden market inflation and can lose a considerable amount of money. For example, if a home is worth $300,000 when the renter and seller begin negotiations and the contractual agreement states the seller is obligated to pay $320,000 – the price is no longer negotiable. If after three or four years, by lease end, the home price inflates to $360,000 for any reason, the buyer is only obligated to pay $320,000 – the seller losing the $40,000.
When it comes to determining whether a rent-to-own option is ideal for you, you must consider both the good and the bad. Whether you are the seller or buyer, you have the potential to benefit more from rent-to-own or the potential to not benefit. Analyze and weigh your options wisely, use an estimating software to help make your decision an informed one.