Do 'rent to own' housing deals actually work out?
If you've been in the U.S. over the last couple of years, you've seen the signs, generally at large intersections: “Rent To Own! No Financing Necessary! Call Now!”
They're touted as a good deal for owners who have trouble selling and buyers who can't get conventional financing.
In most cases, the seller gives the tenant the right to buy the house at some point in the future, usually one to three years out, for a price that's agreed upon today, plus a fee that will keep the option of buying open.
Tenants are also typically required to put down a deposit towards the final sale price which will be held by the homeowner as credit towards the price of the home at the end of the lease option.
While these offerings are nowhere near as common on this side of the border, several small Canadian companies have been using a similar pitch to entice prospective homebuyers into the market as well as targetting cash-strapped homeowners looking to get out from under.
And for many people, things haven't been working out that well. When one B.C. couple tried the rent-to-own route last year, the deal fell apart early. The so-called prospective buyer ended up squatting in their property.
Another Ottawa couple signed an agreement with Rent 2 Own Canada in which stated that a $10,000 down payment and then $1,800 per month in rent would ultimately lead to them purchasing the home in about five years.
Unfortunately, that's not what happened. Instead, they could be on the street after the embattled company has found itself facing 18 lawsuits claiming $2.5 million in damages from jilted tenants and homeowners.
The whole thing is a mess, so much so that it's starting to look like a Ponzi scheme in which existing investors were being paid out of newer investors' contributions.Have you been involved in a 'rent-to-own' arrangement, either a buyer or seller? How are things working out? Do you know any tenants who've actually came out ahead?
By Gordon Powers, MSN Money
Posted by: Consumer | Jul 13, 2021 10:04:27 AM
Rent to own sounds great. But the renter can't even pay rent let alone a mortgage payment. These people need jobs not more ponzi schemes
Posted by: renter on his way to own | Jul 14, 2021 12:21:30 AM
In Canada, Made a private deal after my business fell apart in 2009 recession.
found a new job, on my way to owning, and all parties happy
Posted by: renter on his way to own | Jul 14, 2021 12:24:39 AM
In Canada worked out a rent to own privately after losing business in 2009 recession.
On my way to ownership, and happy faces on both sides of the deal
Posted by: Been on both sides of the fence | Jul 14, 2021 12:35:06 AM
QUOTE "Posted by: Consumer | Jul 13, 2021 10:04:27 AM
Rent to own sounds great. But the renter can't even pay rent let alone a mortgage payment. These people need jobs not more ponzi schemes"
That's an incredibly mind numbing idiotic comment. Granted several hundred thousand may fit that profile, but far from all renters are like that.
I recently sold a home in Canada to an IMMIGRANT THAT WAS UNABLE TO OBTAIN FINANCING because he had no credit history in our country. I drew up a rent to own lease with option to purchase and the transaction ended well for both parties.
Not everybody falls into your sterotype. I've been in that same situation myself, and thought I would pay it forward to somebody else in need that I thought was worthy of the same opportunity.
I have heard of this being a raw deal, mostly for the renter. As with anything in this world though, buyer beware.
Posted by: unknown | Jul 14, 2021 10:05:18 AM
Rent to own company`s are scams. Over 90% of people that try to do a rent to own get scammed by these companies that's how they make their money. My husband and I were going to do a rent to own in the long run the dealer that were dealing with had so many excuses.
Posted by: this works for some not all | Jul 14, 2021 10:35:19 AM
I did this and it worked for me quite well when my business failed. Its not for everyone. Its works great for people who cant qualify for a mortgage, i.e. self employed, new immigrants etc. The people i worked with were excellent and worked with me for 3 years to get my house back to being my own. Unfortunately there are people out there that will take advantage of others and it happens a lot.
Posted by: CN | Jul 14, 2021 10:43:23 AM
I have been in the business of rent-to-own housing for a number of years now. I think it is a win-win for both parties. My lessee's have always been good people that had some bad luck with credit and I helped them turn it around. I now have 9 successful families that have purchased my homes after I rented to them for a couple of years. I would never dream of scamming someone out of a deal. Shame on those rent-to-own owners who do this stuff !
Posted by: Paul | Jul 14, 2021 11:35:02 AM
I've been arranging rent-to-owns for tenants in Canada for over 10 years in BC and AB. The best way we have found that they do work is with companies like ours who do 3 things.
1. We send the tenant to a mortgage broker who can help fix any credit issues over the term of the RTO and ensure that the tenant will be able to qualify for a mortgage in 24-36 months.
The challenge is that many tenants either have not enough down payment or credit blemishes and feel embarrassed to go to a mortgage broker right away. So, they find an RTO company that does not require them to see a mortgage broker. This should be the first sign to steer clear as they do not have your best interests in mind and you as a tenant are just hoping for the best without being realistic. These are the deals that usually end up not working out.
The ones we do (where the tenants is pre-screend by a mortgage broker ahead of time) end up where 80-90% go through. The other 10-20% do not, mainly because the tenant gets a job transfer out of province, divorce or some exterior influence other than the agreement itself.
2&3. The other terms we put in all our RTO agreements is that the tenant must have the contract reviewed by a lawyer and, have a property inspection before moving in. This protect the tenant in two ways.
1. they understand what they are signing and,
2. they understand any defects of the property.
RTO transactions can be complicated and you need to protect yourself as a tenant. Seek out RTO companies who require you to get pre-screend by a mortgage broker, have a property inspection before moving in and allow you to have the contract reviewed by a lawyer.
If they don't, then you are likely dealing with and RTO company who is looking to get you into a property to cover their holding costs and doesn't really care if you buy or not. In many cases, they're hoping you don't.
If getting into an RTO is too easy - then there's likely a reason why.
Find RTO companies who make you as a tenant do 1, 2 & 3 at a minimum.
Otherwise, you could very easily waste 2-3 years and end up with nothin
Posted by: Niki | Jul 14, 2021 5:16:22 PM
3 years ago we were convinced into a deal similar to this, the former owner of the property was a mortgage broker, he had our mortgage set up and a realtor had sold our old home. then the market fell apart, we were unalbe to finalize the deal because the bank asked for a new evaluation of the home, it came it 35K too low and the deal fell apart. We were living in the new home (dream house) our old house was gone. We made a deal with the owner that we would remain in the home, continue to pay the mortgage etc. 2 years in and the market had not rebounded enough yet a compnay came knocking at Chritmas time to inform us that the mortgage had been in default for 6 months. We attended court with all of our receipts but were given 45 days to vacate our dream home. In a nut shell, this man took 108K worth of pymts from us over 2 years and when he himself got into trouble paying his own bills he used our money to keep what he had. The courts sold our home for a fraction of what we had initially paid for it, we were too embarrassed by what had happened to even consider making an offer. So in a nut shell sometimes situations happen to people that are beyond their control, we got screwed because of the market not because we couldn't qualify on our own. Still to this day, I have creditors calling me looking for the man we made the deal with as the mortgage company was also granted a large financial judgement against him and because we attend court they feel we know where to loacte him.
Never in our wildest dreams did we think it could happen to us
Posted by: Parklane Jane | Jul 14, 2021 9:52:16 PM
I manage a large mobile home park in northern Alberta Canada. I have seen Rent to Own deals many times, and they seem to work well for both the seller, and the purchaser. It is an option for people who have older homes that wont sell as well, and for people who can not afford to finance a new, or more expensive home. I only know of one deal that did not work out, and that was because the purchaser had to relocate due to his job, and had to forfeit the deposit, and the payments made revert to rent paid, instead of purchase price on the home, so the buyer lost some money. The seller then had to relist the home and find a new buyer. I have seen Rent to Own work well for all parties involved.
Posted by: Rickyracoco | Jul 15, 2021 10:37:36 AM
If you sign into a rental purchase agreement make sure you place a lein on the property to protect your down payment and investment.