Renting-to-Own a House: Is it a Good Idea?

Yes it's a good Idea but at what Price!

Here is a quick Description about a Rent to Own House...

Source:Wikipedia
Rent-to-own, '"Rent 2 Own"' also known as rental-purchase, is a type of legally documented transaction under which tangible property, such as furniture, consumer electronics, motor vehicles and home appliances, is leased in exchange for a weekly or monthly payment, with the option to purchase at some point during the agreement.

A rent-to-own transaction differs from a traditional lease, in that the lessee can purchase the leased item at any time during the agreement (in a traditional lease the lessee has no such right), and from a hire purchase/installment plan, in that the lessee can terminate the agreement by simply returning the property (in a hire purchase the buyer has a limited time, if any, to cancel the agreement).

The usage of rent-to-own transactions began in the United Kingdom and Europe, and first appeared in the United States during the 1950s and 1960s. While rent-to-own terminology is most commonly associated with consumer goods transactions, the term is sometimes used in connection with real estate transactions.

My Definition:
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Renting to own a house can be a very nice and perfect way for a buyer without enough cash for a down payment to buy a home or rent to own a house. Homework please...

In a typical rent-to-own contract, the owner and tenant sign an Option to Purchase agreement, where, for a fee, the tenant acquires the right to buy the home two or three years later, at a set price. The fee is usually 2 to 2.5 per cent of the purchase price. The tenant pays the rent each month, plus another amount towards the down payment.

Problems can arise when a middle man offers to get between the home owner and the rent-to-own tenant. The middle man offers to manage the arrangement for the owner for a fee and may also guarantee the owner a sale if the tenant doesn’t buy it.

If the middle man is a scam artist, he disappears with the fee leaving the home owner and tenant wondering who owes what to whom and their rights.

Many tenants who cannot qualify for a mortgage might be excellent candidates for a rent to own contract. But they should remember these arrangements require the same due diligence and protections as any real estate contract, to avoid problems later.

Here are some suggestions:

•Any deposit sum paid towards the final purchase price by the tenant should be held in trust, similar to a normal real estate deal. It should not be paid to the landlord or a third party, until the deal closes or terminates.

•Do your homework. For a small fee, go to the county registry office and get a copy of the owner’s title records, showing who actually owns the property and the amount of any mortgages registered against title. Now you know you are dealing with the correct owner. You should also ask for a mortgage statement showing how much is owing on the property.

•Register the lease and option agreement against title. This will protect the tenant from future dealings by the owner with the property. In most cases, the tenant will have to pay land transfer tax in order to do this, but it should not be more than $100, so long as the option agreement is kept separate from the lease, since land transfer tax is only payable on the price paid for the option, not the final purchase price.

Or just use a lawyer to protect everyone involved by doing the proper due diligence in advance.

Be suspicious of a middle man who wants to buy an option on your home. Rent-to-own can work for landlords and tenants, if everyone is properly prepared before signing anything.

I hope this report gave you a better understanding.