A rent to own home or a lease with an option to buy can be a great way to buy real estate, but you need to know how it works and what is really involved. Too many buyers jump into a rent to own and end up regretting it. How about we go over some of the details of rent to own real estate in Utah.
First, we are going to assume that you know the basics. You know about the non-refundable Lease Option or Option Consideration fee that you pay upfront (2 to 7% of the purchase price). You know that you will be paying extra (20 to 50% of the rent price) that will go towards the purchase price. You got that, right? Good. Now let’s get into some of the details of a lease option property.
You Need a Lease Option Agreement
You should have two contracts. The first is a standard lease agreement. It will set the term, the rent, due date and who handles what repairs, etc. It is just like any other lease agreement.
The second is the Lease Option Agreement. This will set out the terms for the purchase. It should include a purchase due date. It should either state an agreed upon rent to ownpurchase price or how a future purchase price will be set. This agreement will also set out the additional monthly payment that is put towards the purchase price.
What you need to know: You should have an attorney look over both agreements. Be aware that if you decide not to purchase the house, you will lose all of the money you have paid. Make sure your agreement allows you to buy the home at any time – not just at the end of the lease term.
You Need a Home Inspection
This is an area that a lot of tenant-buyers forget about. You are officially purchasing the home even though it is in a rent to own situation. Just because the transfer of title is several years off, you are committing to a purchase. You need to know what you are committing to. That is why you need a home inspection.
What you need to know: Get a home inspection before you sign the Lease Option Agreement. Make sure you are willing to accept the condition of the home.
You Need a Credit Check on the Seller
Let’s be honest. Most sellers want their money upfront. Often rent to own properties can be distressed sales, underwater loans or sellers who maybe in financial trouble. You definitely do not want to be caught in the middle of a foreclosure or lawsuit while you are in a rent to own agreement.
What you need to know: Get a credit check on the seller (don’t worry, they will do the same on you). Make sure that they do not have any delinquent accounts. Check to see that the property taxes have been paid.
Rent to own homes in Utah are a great way to own real estate – but you need to do your due diligence, understand the fine print, and make sure you can depend on your seller. If you do that, then you have gone a long way to owning your own home.
If you’re looking for houses for rent by owner in Utah, there are things (as explained in this write) to be considered. At Utah Rent To Own Homes – Northern Realty we help you own a rental property with no risks involved.