Rent-to-own agreements generally consist of two main components: a standard lease and a purchase option.
: Unlike traditional rentals, these contracts often shift the burden of repairs and upkeep to the tenant before they officially own the home. Lease Option vs. Lease Purchase homes with option to buy
: Buyers pay a non-refundable "option fee" (typically 1% to 7% of the home's price) to secure the exclusive right to buy the property later. Lease Purchase : Buyers pay a non-refundable "option
: Grants the choice to buy. If the tenant decides not to proceed, they forfeit their fees but are not legally forced to purchase. : Monthly rent is often higher than market rates
: Monthly rent is often higher than market rates. The excess (known as a "rent credit") is held in escrow to be applied toward a future down payment.
: Creates a legal obligation to buy. Failure to complete the purchase at the end of the term can lead to breach-of-contract lawsuits and the total loss of all invested funds. Pros and Cons for Buyers Lease-Option Purchases - National Association of REALTORS®
