Why rent to own?

In almost every situation I come across, rent to own has not been a smart alternative for a home buyer for the following reasons:

• 1) You are often forced to choose from -literally- a couple of homes.

When buying a home you don't want to limit yourself to a small fraction of the homes available to you.

If you see an ad for a rent to own home it is important to ask yourself one question. Why is the owner not simply selling the house and getting their equity? The answer is simple: they can make more money on a rent to own.

• 2) In most cases you pay more than market value for the home.

In most rent to own programs the purchase price is determined 1 to 3 years in advance of the purchase. This price is often not negotiable and in our current declining real estate market in doesn't make sense to commit to an inflated home value. Once you commit to the purchase price you are often under obligation to pay that amount.  If you walk away you lose any deposits or monthly amounts you have accumulated towards the home purchase.

• 3) Investors.

A typical real estate transaction involves 6 people: a buyer, a buyer's realtor, a buyer's lawyer, a seller, a seller's realtor and a seller's lawyer. Most rent to own programs involve investors. Investors' profits are a significant cost to you when you are buying your home.

• 4) Increased fees

Rent to own transactions are more complicated than the average home buying process. Depending on how it is structured fees such as land transfer tax, realtor fees and lawyers fees can be up to 2x the average transaction

Most individuals who are looking at a rent to own have a strong desire to own their own home. This desire can allow them to get into a situation where they are paying tens of thousands of dollars more to buy their home. If you are looking to buy a home it is extremely important to have all the variables in your favor.