"Lease to own" property... what is there to know?

Question

Sounds too good to be true... lease a house for a certain period of time, have the option to buy it, all rent paid is deducted from the purchase price.

What's the catch?

Answer 1

Assuming you are in the USA. Laws vary from state to state, but in general you need to be aware of a few things.

Condition of the home. In my area, allot of sellers sell properties in this manner because the properties need lots of repairs. Make sure you have a home inspection performed.

Transfer of title-At what point does the property get put in your name. Is the seller going to sign a warranty deed/deed of trust at the end of the rent period, or do you get the title put in your name when you pay off the house 10 or 20 years later? (this is a land contract, aka as contract for deed.)

One reason that a seller may want to do this is if they just bought it and want to avoid high capital gains tax and want to hold the property in their name for at least 1 year and a day. Lease to own ensures that someone is hopefully going to take care of the home because they might buy it. If you don't buy it, the next buyer will hopefully get a very clean home

If the seller presents you with a lease to own agreement, I would have a real estate attorney review it first. The fee that you pay may save you lots of heartache later

Good Luck

Answer 2

Lease to own. Excellent opportunity to buy a piece of Real Estate. You need to do some research before entering into a contract. There are some legal details you need to consider before signing anything. Most likely an investor is the one making the proposal and most likely, he/she will know how to make more money out of you!

TIP: Look for a REALTOR, a professional with a established business who specializes in that kind of deals. Once you find one, stick with it; properly drafted, a "Lease to own" contract is ideal for any buyer.

Answer 3

Pretty much a scam..you give them a huge down payment and if it does not work out the landlord gets that down payment. Plus most RTO require that you are responsible for repairs. Basically the landlord is betting against you..if you for some reason do not go through with the sale after the specified amount of time he walks away with your down payment + the money that was put towards the purchase every month. Than the landlord gets to start again with someone else while you are out serious $$$

Answer 4

It is good if you own a property but the problem there is not only the monthly amortization but also the yearly taxes.

I also wish to own, at least, a small or studio type townhouse wherein I will house all my memorabillas and books.  But while filling up the forms, at the back of my mind,  it will be hard on my part to pay for the taxes later on! So, I am now confused if I will go on and own a townhouse or not.

See, we are on the same boat. Do take care and GOD BLESS!

Answer 5

First of all, a lease to own IS a glorified rental...your name DOES NOT go on the title until you buy it from the owner.

The catch is that you'll pay more per month than you would if you bought it outright, you'll be responsible for the property taxes and all the maintenance AND will not receive any tax benefits as a homeowner..the LL retains all of those.

You usually pay a very large deposit, about 1% of the "sales" price, and if you don't buy it in the specified period of time...you lose the entire deposit....plus, you have to agree on a sales price in advance, and if the home goes down in value and you don't want to buy it or can't get financing, the LL STILL keeps the deposit.

They are rip-offs, plain and simple.

As a Realtor, I absolutely 100% will not work with a client that wants one...b/c I am not going to assist someone in getting ripped off.