Drawbacks of Rent-to-Own

In one of my previous articles, we discussed the advantages when going through a rent-to-own process of owning a home. This time around, we will be discussing about its drawbacks. Yes, the drawbacks of rent-to-own.

According to the cool springs Real Estate Agent, It is true that a rent-to-own agreement gives the seller income in a slow real market and the buyer opportunity to work his way towards home ownership without the pressure that aspiring homeowners encounter after availing of a home loan through bank financing. But truth be told, it has been known that potential drawbacks exist for both parties.

Buyers don’t get the benefits  without having some risks. It is true that buyers get benefits such as paying only the monthly rent and the freedom to decide how much he will be paying for the option fee, or the money which will go to the home’s purchase price, but there’s a chance too that they get and experience the following drawbacks.

1. Loss of market value of the Real Estate in Nashville Tennessee

    

One of the drawbacks of rent-to-own agreement to the buyer is loss of market value. What if you acquired the home for paying $800 rent every month and $500 for the option fee, just after you acquired it, the value decreased? You lost money and it will be a tough job to find potential buyers for it.

2. Gain of market value.

Now, this is a drawback for the seller. The seller must sell the buyer the home for the amount agreed on in the rent-to-own agreement. If the home gains value, the seller loses potential money when the purchase option is used by the buyer.

3. Fixed turning over period.

Even if you are a buyer who has a solid financing ability, you cannot acquire the home while the rent-to-own contract is active. This means that even if you make offers to the landlord or homeowner, he should not accept it. The landlord is expected to turn down the offers as long as the agreement or contract is active. Therefore, you need to wait until the time of turning over arrives.

4. Loss of option.

As a tenant of a rent-to-own home, you can loss the amount you paid for the option fee as soon as you paid it to the landlord. If you decide of not purchasing the home anymore, you will lose the option fee because it is considered as landlord or owner’s income if you, the tenant, does not ultimately purchase the home.

5. Maintenance and repair issues.

Both the buyer and owner has the responsibility for the maintenance and repair issues of the home. The seller typically assumes legal responsibility for maintenance and repairs, but in some cases, the buyer agrees to do so in exchange for concessions, such as a lower purchase price or monthly payments.