Rent To Own

Rent to own

Rent-to-own is a type of agreement that allows a potential buyer to rent a property for a certain period of time, with the option to purchase it at the end of the term. While this may sound like a convenient way to achieve homeownership, it is often fraught with risks and pitfalls that can cost you a lot of money and frustration. Here are some reasons why rent-to-own takes advantage of you and how to avoid falling for it.

Reason 1: You pay more than the market value

One of the biggest drawbacks of rent-to-own is that you end up paying more than the market value of the property. This is because the rent-to-own contract usually includes a higher monthly rent, a nonrefundable option fee, and a premium price for the home. The monthly rent is typically 10% to 15% above the market rate, and a portion of it goes toward the purchase price of the home. The option fee is a lump sum that you pay upfront to secure the right to buy the home later, and it is usually 3% to 5% of the home’s value. The premium price is the agreed-upon purchase price of the home, which is often inflated to account for the appreciation of the property over time.

All these extra costs add up to a significant amount of money that you could have saved or invested elsewhere. For example, if you rent-to-own a home worth $300,000 for three years, you may end up paying $36,000 in option fees, $54,000 in rent credits, and $330,000 in purchase price, for a total of $420,000. That is $120,000 more than the original value of the home, and it does not include interest, taxes, insurance, or maintenance costs.

Reason 2: You have no ownership rights or protections

Another reason why rent-to-own is a scam is that you have no ownership rights or protections until you buy the home. This means that you are still a tenant, not a homeowner, and you are subject to the landlord’s rules and regulations. You are also responsible for paying rent on time, maintaining the property, and complying with the terms of the lease. If you fail to do any of these things, you may lose your option to buy the home and forfeit all the money you have paid toward it.

Furthermore, you have no control over what happens to the property or the landlord during the rental period. The landlord may decide to sell the home to someone else, default on the mortgage, or face foreclosure. The home may also suffer from damage, depreciation, or legal issues that affect its value or title. In any of these scenarios, you may end up losing your chance to buy the home or having to deal with a lot of hassle and uncertainty.


Reason 3: You may not qualify for a mortgage at the end of the term

The final reason why rent-to-own is a scam is that you may not qualify for a mortgage at the end of the term. Rent-to-own contracts usually last for one to three years, during which you are supposed to improve your credit score, save for a down payment, and secure a mortgage. However, this may not be as easy as it sounds, especially if you are paying a high rent and have other financial obligations. You may also face challenges in finding a lender who is willing to finance a rent-to-own deal, as some lenders may not accept the rent credits as part of the down payment or may require a higher interest rate or stricter underwriting standards.

If you are unable to get a mortgage at the end of the term, you have two options: either extend the contract or walk away from the deal. Extending the contract may mean paying more fees, rent, and purchase price, and it may not guarantee that you will qualify for a mortgage later. Walking away from the deal may mean losing all the money you have paid toward the home and having to start over from scratch.


No Home

Reason 4:  There is another way

Instead of having the option to buy a home in years.  Simply buy the home now, usually with a smaller down payment then rent to own.  It’s a special program we like to call

  XRent.  Learn more 


How to avoid rent-to-own scams

Rent-to-own is not a scam in itself, but it is a risky and complicated way to buy a home. Therefore, you should be very careful and cautious before entering into such an agreement. Here are some tips on how to avoid rent-to-own scams and protect yourself:

  • Do your research. Before you sign anything, make sure you understand the terms and conditions of the contract, the market value and condition of the home, and the reputation and background of the landlord. You should also consult with a real estate agent, a lawyer, and a financial advisor to get professional advice and guidance.
  • Do your due diligence. Before you move in, inspect the home thoroughly, get a home appraisal and a title search, and verify the landlord’s ownership and mortgage status. You should also check the zoning, taxes, insurance, and HOA fees of the property, and make sure there are no liens, encumbrances, or legal issues that could affect the sale.
  • Do your homework. During the rental period, work on improving your credit score, saving for a down payment, and getting pre-approved for a mortgage. You should also keep track of your rent payments and receipts, and maintain the home in good condition. You should also monitor the market trends and the home’s value, and be prepared to negotiate or cancel the deal if necessary.


Rent-to-own may seem like a convenient and affordable way to achieve homeownership, but it is often a scam that can cost you a lot of money and trouble. Rent-to-own contracts usually involve paying more than the market value of the home, having no ownership rights or protections, and not qualifying for a mortgage at the end of the term. To avoid rent-to-own scams, you should do your research, due diligence, and homework at before and during the rental period, and seek professional help and advice. Alternatively, you may want to consider other options, such as saving for a down payment, applying for a low-down-payment mortgage, or buying a cheaper home.

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