There’s more than one way to strike a mutually-beneficial deal with a home seller and find yourself the owner of your new dream home. Let’s look at one of the often overlooked methods for purchasing a home by covering the pros and cons of using a rent to own agreement to buy a house in Delaware:
Pro: Lowered Requirements
When looking to rent to own a home, you’ll find that your credit score has less of an impact on things since you aren’t taking out a large loan.
On the other hand, you will need to provide between 2 and 7% of the agreed purchase price of the home as a non-refundable option, or premium, fee. Additionally, the ebb and flow of the real estate market could mean the property appreciates substantially while you’re renting it, and you could certainly come out ahead if you do end up buying the home.
Con: Harder to Build Equity
While you’re still renting, you’ll be paying your monthly rent along with a rent credit. Rent credits are a portion of your monthly payment that goes toward the future purchase of the home.
As stated previously, option fees are non-refundable and the same goes for rent credits.
For someone who has outright purchased their home, every month they make a payment where a portion of that goes toward the principal of their mortgage. This allows them to build equity in their home on a steady basis.
However, while renting the property, you aren’t necessarily building equity until you finally purchase it from the owner. If you decide to not purchase the home, you lose any potential equity along with the option fee and rent credits.
Pro: Legal Protections
Any rent-to-own agreement should be reviewed by a real estate attorney to ensure legal protections for all parties.
The attorney will be able to find areas in the contract that are lacking or entirely missing, and this allows both the buyer and seller to make adjustments to their mutual agreement. Having this finalized binding contract provides both peace of mind as well as practical solutions to most disputes.
Con: Liability Still Exists
Your finalized rent-to-own papers will hopefully cover any foreseen complications, but the contract does not eliminate the possibility of legal action in the future.
There could come a time where one party decides to dispute a portion of the contract, and this could lead to a costly legal battle. Stopping this from happening is one of the main reasons we recommend having a real estate attorney carefully go through your rent-to-own agreement prior to anyone signing it.
Pro: Flexibility
Just because you decide to enter into a rent-to-own agreement does not mean you will absolutely be required to purchase the home if you change your mind.
You may live in the home for a year before discovering it has critical flaws that need expensive repairs. Perhaps the neighborhood does not work for you in one way or another.
As long as your rent-to-own agreement does not lock you into a specific path into buying the home without any way to back out, you will have the option to walk away.
Con: Less Freedom
Renting someone else’s home can mean they maintain majority control over the property until it is purchased by you.
You could be required to repaint using specific colors, or you could be barred from making changes to the landscaping.
Owning your home brings with it the ability to mold it in your own image, but you may not be allowed to make those choices while still renting the property. Ultimately, it all comes down to the terms of your rent-to-own agreement and the pliability of the seller.
Buying a House with a Rent to Own Agreement in Delaware
If you’re looking to buy a house using a rent-to-own agreement in Delaware, contact us today at 302-285-9988!