Rent To Own --- Balancing the Risks and Benefits . . .


Rent To Own --- Balancing the Risks and Benefits . . .
By Scott Rogers • March 13, 2008
Housing supply in Harrisonburg and Rockingham County is high in many price ranges, and has been for many months now. As a result, some sellers are anxious to sell their homes, and some buyers are hesitant to commit to buying. It has become a standoff of sorts! Additionally, some buyers are having difficulty obtaining financing, as many loan programs have disappeared, or become more restrictive (100% financing, for example). These factors have prompted some buyers to pursue a rent-to-own opportunity, where they would rent a property for a period of time before they purchase it. Sellers aren't always thrilled about the possibility, but some are willing to explore it. Let's take a look at it from a few perspectives: Buyers are typically most excited about obtaining new housing without closing costs, a mortgage, or a long-term commitment. A buyer can, at some point in the future buy the home in which they have been living, without physically moving, and often at a sales price determined at the start of the rental relationship. Aside from the missed opportunity of tax savings, paying down mortgage principal, and appreciation --- a rent-to-own opportunity generally works well for a buyer. Sellers are often very lackluster about the opportunity to lease their property to a buyer and then (possibly) sell it to them at some point in the future, for good reason. Often, the future purchase price is fixed, which eliminates the seller benefit of increases in property values. A buyer typically is not required to buy the property, and thus the seller may be back in the same situation of needing to sell, when the buyer's lease term or option period comes to an end. They only positive aspect of a rent-to-own scenario for a seller is the fact that someone starts providing incremental income immediately. Cash flow can sometimes drive a seller to commit to a rent-to-own relationship. If both the buyer(tenant) and seller are willing to explore a rent to own agreement, here are some of the main questions to consider: What is the rental rate? Is all, or part, of the rent credited to the buyer's future purchase? How long can the buyer rent before having to buy or vacate? Do both the buyer and the seller have the ability to decide that they don't want to buy/sell the property at the end of the lease period? Can the buyer end the lease period early and proceed with a purchase? Is the purchase price set at the beginning of the lease term, or at the end of the lease term? These are just a few of the many issues and questions to consider when pondering a rent to own relationship, either as a buyer or seller! Receive Updates by Email Recent Articles: There Are Plenty Of Types Of Houses That Exist That Just Are Not Available To Purchase Home Sales By Price Range In The City Of Harrisonburg Are You Compromising On Aspects Of Your Next Home That You Can Or Cannot Change Later? How Much Slower Are The Winter Months In Our Local Housing Market? Rockingham County and New Home Sales Drive Surge in Area Housing Market Find The Balance Between Optimistic And Realistic Home Pricing Room Size Is Difficult To Understand Solely From Real Estate Photos How Much Would You Value Not Having To Prepare Your Home For Showings? One Out Of Four Homes Is Taking Longer Than A Month To Sell Consider The Cost Of Your Planned Renovations When Planning Your Offer
Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com
Based on information from the Harrisonburg-Rockingham Association of REALTORS® or its MLS, for the period Jan 1, 2000 through Nov 21, 2024 (unless otherwise noted).
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