Rent-to-own real estate deals can benefit both the buyer and seller. A rent-to-own lease agreement is a standard lease contract. However, the one difference is that there is an added clause that gives the tenant (buyer) an option to purchase. This document is most commonly used for homeowners that want the ability to bring in rental revenue while having the option to sell their home at a later date to the tenant at a pre-negotiated price.
What You Should Know Before Using Our Rent to Own Real Estate Purchase Contract Form
For a real estate rent-to-own contract form to be legally binding, this form cannot stand by itself. Instead, it must be paired with a lease agreement contract. A rent-to-own contract form deals with the terms of sale and includes the option to purchase a property. A lease agreement is still required throughout this process as it focuses on other details. This document deals with the rental details between the seller and buyer-also considered the renter.
Rent to own is also commonly referred to as a lease-purchase, lease-to-own, lease option, and lease with an option to purchase. While all of these terms may sound slightly different, they all refer to the same process.
Below are common terms used in real estate rent to own contracts:
Also known as option consideration. An option fee is the money that the eventual buyer pays for the right or option to buy the property. The time limit associated with this agreement is usually 1 – 3 years. While there are no laws guiding the option fee, the fee typically falls between 1 – 5 percent of the total purchase price of the property. This fee will be kept by the seller even if the buyer chooses not to buy the property.
In addition to the option fee, a rent to own buyer is normally expected to pay higher-than-market rent. This “extra rent” is documented and a buyer who decides to purchase the property will be given a special rebate called a rent credit. Once the buyer purchases the property, the extra rent will be considered a credit off of the total price. While this is a great option, the buyer must stick to the rules outlined in the contract to receive this perk.