Money Tips: Lease-to-Own Options for Homebuyers and Sellers

Buying a home can be an overwhelming undertaking. Not only do you have to consider the on-going cost of the purchase, but homeownership also comes with unplanned costs. Furthermore, often when you buy a home, you must purchase the appliances and fixtures that go into the home.

Many people have begun arranging lease-to-own options with homeowners as a better solution for both the buyer and the seller. As with a lease-to-own arrangement, renters will pay the homeowner a monthly rental fee for the duration of the time that renter and the homeowner agree upon. The renter will also put an "option" on the house, which is a payment of 1-5% of the value of the house.

During the time that you lease the home, the homeowner will be responsible for all property maintenance, including plumbing and electrical considerations. However, when the term of the rent is up, the renter will own the home.

Keep in mind that while leasing-to-own is a very practical idea and usually works out to be the best possible arrangement for both the homeowner and the leaser, there are some considerations that both parties must be aware of in order to move forward strategically. Here are some considerations that you will definitely want to think about:

Legal Impact

When you lease a home or lease-to-own a home, there is a very serious legal impact. As a homeowner, you are responsible for all goings-on on your property. If someone does drugs, the homeowner may be at risk for losing the house, if the activity is caught. The homeowner also opens him or herself up for unforeseen liabilities and damages. As a homeowner, you will be responsible and liable for any injuries or neglect of the property. Therefore, the legal burden needs to be taken very seriously.

Also, consider that the value of the house and the taxes will increase over the duration of the time that you are renting-to-own. Therefore, the agreement will need to be very clear about the finally payments for the home and the considerations to the homeowner and the renter. For example, if you rent a home that suddenly increases in value, what happens to the monthly or finely price of the home?

In order to ensure that the renter and the owner are happy with the terms of the arrangement, both parties will want to consult their attorneys. This will likely be a long-term relationship, so it will be essential that you are comfortable with the arrangement.

Long haul

A lease-to-own option is generally one that takes several years or decades to actualize. Depending on the price of the house, the lease-to-own period can be very long or short. Some people will want to rent as if they were paying off a 30-year mortgage. If this is the case, then make sure that you like the property, as you will have to stay until your lease-to-own period is expired (or you will have to buy-out the homeowner.)