With rent-to-own purchasing of houses becoming on the rise, one should bear in mind and know who they’re doing transactions with and have the precautions and profits on a balanced level. A real estate lawyer with Aaron & Aaron, Bob Aaron said the increase for rent-to-own happens as a result of the rise amidst market downturns, and people with bad credits use this as an opportunity as this is one of the few options available to them. Aaron conversely said that he opted to guide clients when going into such dealings. One of the ways is to have those buying houses short-shrift by paying for a house more than its actual market leasing price than they would for the same house, and if the buyer doesn’t not buy the home, it cannot be reobtained.
Aaron said “Rent-to-own helps when the seller can’t sell and when buyers can’t get approved for mortgages, but the way it often works is the seller gets the lump sum from the buyer/tenant which is used to underwrite the down payment. So if the buyer decides not to close, or can’t close, or can’t get a mortgage, all that money they paid up front and along the way is down the drain.” He also added that another dilemma with rent-to-owns is that the forms are not of industry standard. This means both parties are at risk, and not just the one renting or buying the house.
Adding that the courts do not identify rent-to-owns covering the tenancy act, Aaron said “A defaulting owner can stick the landlord-/investor with all kinds of arrears, mortgage taxes, utilities, and damages to the house, and the landlord/owner/seller is going to be stuck with those arrears and damages. If the buyer- occupant is in default, it’s very difficult to get rid of them.”
CEO of Homeowners Now, Dale Monette elucidated to CREW that by helping renters with what they need to have their credit scores improved, save up on cash and finally get to acquire their own homes, the rent-to-own model can become a remarkably effective means to assist families in owning their own home.
Dale said “Some rent-to-own companies do a $0 down payment, but we want to get them financially invested by placing an initial down payment, typically 3% of the purchase price, and holding it in trust for them. Based on our research, $0 down programs have a higher likelihood of the client walking away from the property because they weren’t financially invested.” In any case, clients do not go with the agreement, Homeowners Now had made it an in-house decision to have their down payments refunded, and however, that has not been the case. This is a result of them making sure they do their best to provide their tenants with what they need.