Why might a rent-to-own home agreement be risky for the tenant?
Qualifying for a mortgage requires strong credit and sufficient income. Many Americans find themselves unable to obtain a traditional mortgage due to a lack of credit, a negative payment history, or not enough income. For those individuals that do not qualify for a mortgage through the bank, but desire to own their own homes, a lease-purchase agreement may seem like the best option. A well-crafted rent-to-own agreement could make your dreams of home ownership a reality, but anyone considering such a purchase will need to consult with a Staten Island real estate lawyer before signing as these agreements can also be risky.
Potential Downsides to Rent-to-Own Home Agreements
Little regulation exists over residential lease-purchase agreements in New York. In a typical rent-to-own agreement, the tenant will agree to pay a certain sum each month, with a set amount of money going towards the purchase price of the home. The tenant/purchaser must come up with financing to complete the purchase by the end of the term agreed upon in the lease-purchase. If the tenant/buyer walks away from the purchase, he or she will typically also lose all funds paid towards purchase of the home.
Ensure Your Lease-Purchase Agreement Offers You Legal Protection
If you want to pursue a lease-purchase agreement, there are certain factors you need to consider. You must ensure the agreement you sign protects you to the fullest extent. For starters, you will need to allow yourself a period for inspection of the property, preferably with a certified inspector. All too often, lease-purchase tenants move into a property, only to find it has costly problems. Under the terms of the agreement, the tenant/buyer is often responsible for all repairs, even before the final sale of the property.
Further, you will want to consider how you plan to finance the purchase of the home when the time comes due. You may want to insert a clause that allows for the return of your funds allocated towards the purchase in the event you cannot qualify for financing. Always consult with a real estate lawyer before you sign any home purchase agreement so that you do not make a costly mistake.