Monday, June 11, 2012


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.

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