While rent-to-own agreements have traditionally been geared toward people who can’t qualify for conforming loans, there’s a second group of candidates who have been largely overlooked by the rent-to-own industry: people who can’t get mortgages in pricey, non-conforming loan markets. “In high-cost urban real estate markets, where jumbo [nonconforming] loans are the standard, there is a large demand for a better solution for financially viable, credit-worthy people who can’t get or don’t want a mortgage yet,” says Marjorie Scholtz, founder and CEO of Verbhouse, a San Francisco–based start-up that’s redefining the rent-to-own market.
Depending on the terms of the contract, you may be responsible for maintaining the property and paying for repairs. Usually, this is the landlord's responsibility, so read the fine print of your contract carefully. Because sellers are ultimately responsible for any homeowner association fees, taxes and insurance (it’s still their house, after all), they typically choose to cover these costs. Either way, you’ll need a renter’s insurance policy to cover losses to personal property and provide liability coverage if someone is injured while in the home or if you accidentally injure someone.
In 2009, the United States Congress tried to rescue the economy with a $700 billion bailout for the financial industry; however, there was a growing consensus that the deepening collapse of the housing market was at the heart of the country’s acute economic downturn. After spending billions of dollars rescuing financial institutions only to see the economy spiral even deeper into crisis, both liberal and conservative economists and lawmakers pushed to redirect an economic stimulus bill to what they saw as the core problem: the housing market. But beneath the consensus over helping the housing market, there were huge differences over who should benefit under the competing plans. Democrats wanted to aim money directly at people in the greatest distress; and Republicans wanted to aim money at almost all homebuyers, on the theory that a rising tide would eventually lift all boats.
It’s normally not necessary to commission a home inspection on a traditional home rental, but remember that rent-to-own is not a traditional home rental. This is a short- and long-term investment that requires the utmost attention to detail. And the small upfront cost of a home inspection could save you literally thousands down the road. Therefore, hire an independent home inspection professional to uncover any problems the house may potentially have. It’s important to do this even if the current homeowner furnishes a disclosure statement that attests to the condition of the home. If the independent home inspector points out problems, it’s important to determine whether or not the issues will prevent you from getting a future home loan once the rent-to-own term ends. Therefore, make sure the contract specifies who is responsible for making the necessary repairs discovered during the inspection prior to finalizing the rent-to-own agreement. The homeowner might offer a credit off the final purchase price at the end of the rent-to-own in lieu of payment for damages. Either way, be sure to get everything in writing before finalizing a rent-to-own contract.