How Rent to Own Contracts Work!
As the real estate market continues to fact challenges, buyers are having a hard time buying and sellers are having a hard time selling. This has lead more people to seek out creative options to meet their real estate needs. One such option is rent to own home or lease option contracts. We will be taking a look at the key elements of a rent to own contract. After reading this, you should have a clear understand as to how rent to own transactions work.
The terms rent to own and lease option are used interchangeably generally speaking. Although some people will try to say that there are subtle differences in the two, by in large they have the same key elements.
The rent to own or lease to own contract combines a lease or rental contract with an option to purchase contract. Depending on the contract structure, you may have two different contracts or the two contracts may be combined into a single document.
What exactly is an option?
An option is the exclusive right to purchase a property for a specific period of time. This means that the property can not be sold to anyone else until your option period expires. This holds true even if the property appreciates above the predetermined sales price. Your option may or may not be assignable. If it is assignable, this means that you may be able to sell the property to a third party should it appreciate without ever buying it yourself.
Houses for rent to own give you control of the property for a specific period of time, but you are not required to exercise your option. Typically you are legally required to pay rent for a specific period of time, but if you decide to walk away at the end of this term you can do so with no additional costs. Of course, if you walk away you will lose your up front option fee as well as any accumulated rent credit, so this is something you should think about carefully.
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