Lease Option Homes are Not Rent-to-Own Scams

When you buy a refrigerator or computer under a rent-to-own agreement, you end up paying far too much for the item. You also risk losing the item and all of your money if you get behind on payments and the renting company decides to come take it back. These deals are almost always rent-to-own scams, but lease option agreements in the real estate industry are very different.

It is easy to consider anything with the title “rent-to-own” a rent-to-own scam, but smart consumers will learn that the term is not always bad. Specifically, the term comes with many advantages when applied to the rent and potential purchase of a home.

What Is a Lease Purchase Home?

A lease purchase home is a home in the real estate market that offers renters a chance to become homeowners. If you don’t have the money saved up to make a purchase outright, you can use this type of rental to save up your down payment while you rent. If you don’t have the credit to secure a mortgage loan right now, you may choose to rent this type of home in hopes of cleaning up your credit and purchasing the home at the end of your agreement.

This type of agreement allows someone renting a home to pay a little extra each month in exchange for the option of purchasing the home after one to three years (sometimes longer). The catch is that the extra rent money goes into a special savings account, and then becomes part of the renter’s down payment if they decide to purchase the home at the end of the agreement. The renter is thus given the chance to save their down payment while renting their home.

There are also other terms that can be added into a lease purchase agreement. For example, there is a lease option which can substantially increase the credit a renter receives for a down payment at the end of the agreement.

Why Is This Not a Rent-to-Own Scam?

The lease purchase agreement is very similar to the agreements signed for rent-to-own electronics, furniture, and appliances. Fortunately, these home agreements are also substantially different and have helped many renters become homeowners. Here are the advantages that can be found with this type of rental agreement:

1. You have the option of purchasing the home at the end of your agreement, but you are not usually obligated to make the purchase. You have the advantage of living in the home for a period of years, and then backing out of the purchase option if you decide you don’t want to make the purchase. This is much easier than selling a home after you have made an outright purchase.
   
2. Your down payment is built into your work, so you are guaranteed to have something to put down when the option to purchase comes open.

There are some potential downsides to going through with this type of agreement, such as taking care of repairs on your own throughout the rental period. You may also lose your money if you back out of the purchase at the end of the rental term. Even with those potential risks, these homes are clearly not rent-to-own scams. Rent-to-own complaints typically do not apply to the housing industry.

Rent to Own Scams Do not Include Homes

Many people across the country have been there, your electric range just gave up the ghost and you do not have several hundred dollars to replace it! Perhaps your scenario is a little different, maybe the in-laws have scheduled a visit and you feel your living room furniture is less than up to par. Whatever your scenario may be, you might be tempted to stop by your local rent to own furniture store for replacements, after all the weekly payments are low, right?

Rent to Own Scams

Furniture stores that offer in house financing seem to provide a valuable service, much needed household furnishings offered for a low weekly or monthly rental. What they fail to tell you is what the item will cost you to actually own. Rent to own scams end up being very expensive for consumers - and it's usually consumers of modest means that get hurt.

You see most rent to own stores expect to turn the product over at least three times. In other words in the business model it is expected that consumers will rent each piece a minimum of three times. This vastly improves their bottom line and means you will be paying top dollar even for previously rented equipment. Add to that the possibility that your appliance or furniture could be repossessed if you miss even one payment, and the scam becomes clearer.

Lease to Own Homes

Aside from the obvious problems with rent to own fraud, one of the biggest issues is the shadow these practices have cast across rent to own homes. Too many people associate the negative stigma of rent to own furnishings with rent to own homes, thereby missing out on the potential benefits.

If you are looking for a home but not appliances rent to own could be your best friend. The same could be said for the homeowner facing two mortgage payments in an economy where house sales are in the basement. Finally, a rental-purchase program that is beneficial to both parties instead of just one.

Agreements

Renting to own a home is fairly simple on the surface, the buyer will be required to pay monthly rental fees as well as a one-time non-refundable option fee. In the best of situations the entire option fee will go toward the down payment, should the buyer decide to exercise their purchase option. The agreement will have a specified time limit, anywhere from 1-3 years.

Terms and conditions of your particular rental or lease purchase option may differ. Some of these options may include:

• Loss of payments
  in some cases the contract will include a stipulation that each rental payment be made exactly on or before the due date. Any rental payment that is received late, will not count toward your purchase and you may even incur late fees.
• Maintenance
  Upkeep of the property is negotiable and some homeowners may prefer that you the homebuyer take care of all the upkeep.

Conclusion

There are many reasons buyers and sellers may want to go into a rent to own agreement. Perhaps the home will not sell due to market conditions or the buyer needs to retain ownership of the property for another year for tax purposes. Buyers may need the time to fix issues with their credit report and a simple way to pay their down payment, but as you can see, it is a win-win situation for all those involved.