Rent to Buy

Rent to buy or lease purchase

If you want to take advantage of the low home prices and the benefits of home ownership but are not able to qualify for a loan right now, you may want to consider a rent to buy or lease purchase option.

In this situation, a landlord who is interested in selling the property agrees to lease the home to someone interested in paying rent now and eventually buying. A contract is written giving the renter the option to buy the property at an agreed upon price. Often, the renter pays a down payment in exchange for this option. Sometimes a portion of monthly rent payments are applied to the down payment. These agreements can be made for any length of time. 6 months to 2 years are common timeframes. At the end of the specified time frame, if the renter cannot or prefers not to buy the property, the option expires. Any money paid for the option to buy is forfeited to the landlord/seller.

What should a buyer consider in a lease purchase?

This kind of agreement makes sense to consider in a down market when home prices are low and sellers are eager to find possible buyers. When looking for a rent to buy or lease purchase, consider the following:

Look for a home that you would like to own—not just rent.
If you are not sure about the area or the home, don’t pay too much for the option to buy. A buyer does need to recognize the value in having the option to buy, but also be okay with walking away from the home and not buying it. Some situations may arise that can affect a buyer’s ability to buy, like a job loss.
Make sure any agreement you make is in writing. Legally, any contract over one year must be in writing, but verbal agreements are almost impossible to argue in courts and can easily be misunderstood between parties.