Rent-to-Own Procedures

In real estate, a rent-to-own arrangement means a tenant and landlord have agreed that the tenant has the option to buy the home he is presently leasing by a setup. Together, they determine how much the sales price of the home is going to be and what is going to take place in case the tenant is not able or determines not to buy the home. A rent-to-own is a good option for a tenant who wishes to buy a home but needs time to clear up negative credit problems.

Sales Price

The tenant and landlord must write a contract that clearly states what the price of the home is going to be if the tenant exercise his option to buy it. They will need to carefully consider the price they’re agreeing to, given the fact that the value of the home could dramatically increase or decrease throughout the time the option is held.

Length of Choice

The typical remodel option lasts three months to five decades. If the tenant has negative marks contrary to his charge he believes will prevent him from procuring a traditional mortgage, he must request a longer term so that he will have time to repair his credit score.

Choice Fee

The tenant generally pays the landlord an option fee in exchange for your landlord’s guarantee he won’t attempt to market the home to another party during the term of the contract. The commission is negotiable but often ranges from 3 to 7% of the sales price.

Rent Credit

The dilemma of lease credit also needs to be addressed at the rent-to-own contract. Some of the rent paid yearly at a rent-to-own scenario goes into a”down payment account.” The lease credit is generally between 30 and 50% of the entire monthly lease payment. Say a landlord and tenant agree that the leasing credit is going to be set in 40 percent. If the tenant makes a monthly lease payment of $1,000, $400 of each payment will be applied to the sales price of the home. In the event the rent-to-own option runs for three decades, the tenant will have $14,400 from the down payment account.

Maintenance Issues

Similar to any other landlord, the landlord at a rent-to-own contract is responsible for making sure the home is habitable and the significant systems, like heating and coolingsystem, work properly. Because everything else is negotiable, prior to signing a contract the parties involved must determine who is going to be responsible for maintenance problems like mowing the lawn and making small repairs to the home.


Rent-to-own isn’t without potential pitfalls. The landlord and tenant must outline in writing what’s going to occur in case the tenant does buy the home prior to the end of the contracted period and also what’s going to happen if he doesn’t. Traditionally, the option fee that was paid at the beginning of the contract as well as the lease credits paid each month have been deducted from the sales price of the home in case the tenant buys the property. If he is not able to secure financing or decides not to exercise his option to buy the house he forfeits any money he’s spent via the option fee and lease credits.

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