Rent-To-Own - Good or Bad?

I think it can be feasible, but if you pursue something, make sure you do it legally - consult with a realtor or lawyer to make sure the agreement is legitimate. Don't just trust the landlord/seller - check out the agreement on your own. There are a lot of do-it-yourself deals that turn out to be either scams or full of problems.

You are in a great position. Gathering information is very important when making any purchase. You need to learn so many things. You need to learn about the real estate market in the area you are interested in purchasing or renting-to-own. What are houses selling for? Is the rental price something your can work out? Is the seller in mortgage trouble? What terms are permitted in a rent-to-own situation in your area (a good question for a lawyer to answer)? Do you qualify for a mortgage? How much mortgage will you qualify for? How much of the rental price will be applied to the down payment or what other terms and arrangements will be applicable in your rent-to-own situation? Is the seller willing to finance your mortgage instead of the bank?

I'm just trying to give you some of the basics of the things you will need to know. You can get price ideas from a real estate agent, you need to discuss your financial picture with a few mortgage representatives to see what kind of mortgage you could qualify for, and you will need to discuss real estate law issues with a lawyer. It takes a village to raise a child and it takes a team of professionals to make a informed decision about if renting-to-own is a good option for you.

A friend of mine had a rent to own opportunity come across his path for a single family house he owned. When it came time for the tenants to purchase they just couldn't get a mortgage because of their poor credit. It was a entire year later that they were able to purchase that house. A portion of the rent they were paying went towards closing costs and points, they had to save money for the 3% down payment. This happend in 2004. Times have changed but you get all the information you need to make an informed decision and best wishes to you.

We ended up in a terrible rent to own situation years ago. The man said he was the chairman of a corporation and had us sign a note saying that we had 2 years to come up with a baloon payment and THEN we would get a title policy. If we had the experience, we could have done a title search and found out that there were defects in the title.

This man was hiding assets from his wife and had tried to sell the property many times and the chain of title was murky. He had done this with other properties as well. The supreme court of Missouri, as well as all the lower courts decided that the corporation he was running was a scam to hide assets from his wife.

We lived in the house for 5 years with his and her lawyers both promising us that no matter what happened on their end, they would make the title clear for us. So we put a lot of time, effort and money into the property. Eventually we left. But he had filed the paperwork showing us as the owners of record.

For the next 10 years or so, we had to prove over and over that we had no access or right to the property and we were not the ones the city needed to fine for violations. They let all our hard work crumble and the house sat in ruins with them living in it, almost never paying the taxes and only paying them just before the court sale would have been done.

FINALLY, 15 years later, we were given 15,000 dollars cash because the bad title defects fell off the record and we were the last in line to keep her from getting a mortgage to fix the property up. I stood my ground and she had to pay us to go away. Despite it's delapidated state, it had more than doubled in value. So she didn't mind paying us too much and was able to make it part of her mortgage.

Soo...my advice, do NOTHING without a title search and get a lawyer to help you, not just a realtor. If you can't afford about 1000 dollars for proper help, don't do it.

Be very careful. Here is a response from Financial Guru Dave Ramsay regarding rent to own situations:

Does Dave Do Rent To Own?
What does Dave think of rent to own?

QUESTION: Matt asks Dave what he thinks of rent to own. He doesn’t like it a lot of the time, but he talks about an option that he doesn’t mind.

ANSWER: In most cases, I wouldn’t do it; like, 99% of the time. I don’t mind leasing with an option to purchase, and that option could go down every so often, even per month. With an option to purchase, you are not obligated to buy. It gives you the right to buy, and in those cases you don’t want to overpay. You want to pay regular market rent to rent the place, and continue to get a very good deal on your option to buy. But rent-to-own is a bad deal 99% of the time.

NO. Don't pay for a realtor. They are in the business of helping you find properties and get paid on the sale. A real estate attorney would be a better option if you want real estate advice.

There are PLENTY of pluses here. You don't have to worry about poor credit. If you decide you DON'T want to stay, you can get out and basically lose your option $$. If you bought the house and wanted out, the option is selling or losing it, should something happen.

EVERYTHING IS NEGOTIABLE. Make sure you've got people who've given you good references and talk to people who have done this w/ them before. I know a family who does this for a living. They actually have a waiting list of families needing housing and are always looking for houses to buy and then work w/ families who have trouble getting a loan, etc.

As far as the inspections go, you should ask the owner for a copy of the most current inspection. Make SURE you know who's paying for plumbing issues, furnace, etc. All of that needs to be perfectly CLEAR. Basically, what it amounts to is that you are buying the house. The owners are the bank vs a traditional mortgage company or bank. Therefore, with a few exceptions and negotiations based on the house and situation, the responsibilities are YOURS. make sure you're clear here. Again, everything is negoitable so make sure you both have it on paper and know what is expected by both parties.

You'll save $$ in the long run by not paying a realtor's commission, etc.
hope this helps.