Rent-to-own programs can be a blessing to people wanting to buy a house before they can qualify for a mortgage or put down a large down payment. A poorly written or worse, a fraud company, can cost purchasers their deposit money, the portion of their rent intended as part of the home purchase price, and their home itself.
Rent to own Edmonton can give purchasers time to build up credit and down payments while they enjoy living in their home. Reputable rent to own companies will never put buyers into a short rent to own contract when they know it will take the buyer several years to qualify for the mortgage. Buyers need to understand the risks and possible pitfalls before signing a rent to own contract.
The 6 most common Pitfalls to Avoid:
1. Every item in most rent to own contracts must be satisfied, or the owner can declare the contract violated and void. The renter loses any money deposited on the home, any rent credits paid, any improvements made to the home, and the home itself. A payment received even one day late may invalidate an agreement. Rent to own Edmonton strongly advises buyers retain an attorney to review all papers and contracts prior to finalizing any deal.
2. Buyers may not be able to get a mortgage at the end of the contract term. If their rent to own company is not flexible, the tenant may be evicted and lose their entire investment. Some companies will work with tenants to extend the term of their contract or help them get mortgage financing elsewhere. Ideally, the rent to own company and the tenant will work together throughout the term of the contract to ensure the tenant can obtain the mortgage.
3. Rent to own houses might not increase in value over the term of the contract. The tenant can have trouble obtaining a mortgage for more than the appraised value of the home in order to meet the contracted price. Some owners and rent to own companies may renegotiate the sales price, but that is not guaranteed. Rent to own buyers must be careful about entering deals that are unaffordable in the long term. Buyers should get an appraisal and inspection on the home prior to signing a contract for rent to own.
4. Foreclosure scams are increasingly common in the rent to own home market. Owners of such homes may agree to a lease-option agreement and take the deposit payments and rents even though their home is already in foreclosure. When the home is eventually repossessed by the bank, the owner is long gone with the money. The tenants are evicted by the bank and lose their investment. There is little recourse when this occurs. Rent to own Edmonton encourages potential tenants to verify the ownership and status of the home prior to signing any contracts.
5. Another scam involves unscrupulous thieves who research real estate listings for homes vacant for months or years. The thieves assume such a neglected and forgotten house will not sell for a long time. They break into the homes, change the locks and then advertise the home as available for sale or rent to own. Buyers move into the home and pay monthly rents and premiums to thieves who do not even own the property. When the tenant is discovered, they are evicted and lose their investment and their home.
6. Foreclosure rescue scams also snare rent to own tenants. Fraudsters take title to a home in risk of foreclosure and then complete a rent to own contract with an unsuspecting renter. The fraudsters disappear as soon as they receive the renter’s deposit and rents towards down payment on the mortgage. The tenant cannot get a mortgage on the property because there is no clear title. Rent to own Edmonton buyers should always confirm clear title to the property before signing any contract or paying any deposit monies. Make sure the person executing the contract and selling the home has a legal right to do so.
Rent to own buyers should beware of any deal that seems too good to be true. Experience shows such deals are often frauds. They must ensure their rent to own contract clearly spells out the financial aspects of the deal, and the responsibilities of each party. The conditions for refunds of deposits and rent credits should be spelled out in the contract. An independent real estate attorney should represent the buyer and review all contracts.
Let Rent to own Edmonton help guide you through these potential problems!
As you can see there are many pitfalls that one must watch out for when looking at the idea of doing a rent to own deal. Let us here at Rent to Own Edmonton help navigate you through these pitfalls so you can be safe and confident in your decision to become a home owner through a rent to own.
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