How does a rent to own purchase work? | Plainfield Real Estate

Right now “rent to own“ is a great option for buyers who want or need to move now, but aren’t ready, or able, to make the commitment to purchase. Because of the economy, rental properties are much more prevalent on the MLS than in recent years. Due to fact that many homeowners owe more than their properties are currently worth their only option for moving is to rent out their properties in the event they need to move or have an investment property they cannot sell.

As far as the terms of a rent to own, there are no defined rules on how to structure the transaction. A lessor can simply agree to sell the property to a lessee upon signing the lease agreement, or they can take what is called “option” money that is non-refundable to secure a sales price and act as a down payment for a sale at a later agreed upon date. In this market, I wouldn’t suggest going this route because market values are constantly changing and most likely home prices 12-18 months down the road will be approximately 6-10% less than market values today. It wouldn’t make sense to pay more further down the road when prices are declining.

As far as rent credits go, most lessors will not give you rent credit toward your down payment because of new FHA rules for purchasing. Down payment assistance cannot come from the seller. There are ways around it, but I have been working with a lot of renters lately and I have not come across any listings that are offering rent credits. You are better off taking $100-200 extra per month and putting it in a savings account as a down payment. Lessors tend to base their rent prices on market conditions, but more than that they are basing them on their own mortgage payments. If a seller didn’t put much money down on a property, they probably have a higher payment, and in turn will ask a higher amount in rent. Prices for the most part are market driven, but they can certainly be affected by the monthly payments of the mortgages on the properties.

Credit checks are required on rental properties and rent to owns. Most lessors require a security deposit (usually equal to one month’s rent) in addition to the first rent payment. Usually lessors like to see pretty clean credit, but in this market with so many people coming out of foreclosure situations, renters with good credit are becoming increasingly difficult to come by. Most lessors will consider problem credit, but may require addition money for a security deposit.

If you have a home that need to rent in order to move… or are looking for a home to rent in the Plainfield, Naperville, Joliet, Shorewood, or Romoeoville area it would be my pleasure to help you! Call me at 630-673-6233 directly.

Julie Ferenzi | Realtor®
Plainfield Real Estate
630-673-6233