Components of a rent-to-own transaction
The main parts of a rent-to-own transaction are the rental term, the purchase price, the upfront deposit and the monthly rent credit. A tenant/buyer and landlord/seller enter into an agreement that is usually 12 to 36 months long and has an option to purchase the home for an agreed upon time. These agreements are sometimes called lease options for this reason.
If the tenant/buyer decides to buy the home and is able to, a standard transaction is completed. If not, the landlord/seller keeps the deposit and sometimes some of the rent credit if the home is damaged, much like a security deposit when you rent a house or apartment.
A rent-to-own contract includes the purchase price, upfront down payment, length of lease, monthly payments, rent credits, and other terms that are standard in lease agreements.
The tenant/buyer can have inspections performed before signing the lease agreement or before purchasing the home, but these are at the tenant/buyer’s own expense.
The tenant/buyer is usually responsible for maintenance. However, the landlord/seller is still responsible for mortgage payments, homeowner insurance and property taxes until the home is bought. The rent-to-own contract also states late payment penalties and eviction processes if rent is not paid.
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