Rent To Own Edmonton
Important Facts And Information About Rent To Own In Edmonton
Overview: Rent to own homes
Rent to own homes are popular options in cities where it makes more sense to own a house than to pay rent. This is usually the case in cities with high rental prices. From a home seller’s perspective, rent to own homes are the best option if the housing market is slow and/or characterised by buyers who don’t have enough money saved up to pay as a down payment for a mortgage. Also, if majority of the buyers you get don’t have good credit, you might want to sell your home under a rent to own arrangement instead of waiting for years to get a traditional mortgage buyer.
Rent to own homes also known as lease to own homes work like car leases i.e. the renter pays an agreed amount of money monthly to live in a house. At the end of a given time period (typically within 3 years), the renter has an option to buy the house since each month a portion of the rent goes towards raising the down payment to buy the house. Edmonton is home to many rent to own homes since the city meets some of the above criteria for rent to own homes. Below is a more in-depth discussion on important facts and information about Edmonton rent to own homes.
Rent to Own in Edmonton
The process involved in rent to own homes in Edmonton
The Edmonton real estate market fits the rent to own concept because of many reasons mentioned above i.e. most home sellers are in a hurry to sell their homes, most buyers can’t afford regular mortgages e.t.c. As a result most sellers prefer converting their homes to rent to own property. Before sellers can convert their property, they have to set a selling price and decide the rent they intent to charge.
It is important to note that renters can negotiate for a better selling price and rent like in the case of a sale. Sellers and buyers must however remember that the selling price and rent is fixed after both parties sign the agreement. Pricing terms can only change after the rental term is over i.e. 1-3 years. This is regardless of changes in prices of other houses during the rental period.
It is also worth noting that renters must pay a set fee known as the option fee. If at the end of the lease or rental term, the renter chooses to buy the house, the option fee they have paid is considered to be part of the total down payment. In case the renter is unable to buy the house at the end of the rental term, the option fee is treated as the seller’s income.
In simple terms, the option fee is meant to encourage the renter to buy the house at the end of the contract period. It is important to note that Edmonton rent to own homes charge a higher rent than what is charged normally. This is the case since a portion of the income is meant to go towards paying for the down payment of the house.
Benefits and risks of rent to own homes to buyers
1. Under typical Edmonton rent to own home agreements (which last approximately 3 years), buyers have enough time to raise the down payment as well as repair their credit rating as they rent homes.
2. Renters are free to walk away from the agreement in case they discover something seriously wrong with the home they intend to buy. Although renters may lose their option fee in such cases as well as all the rental credit monthly, this loss is way less compared to financial loss they would have suffered buying a defective or damaged home outright. It is also important to consider the fact that this benefit has to be agreed upon.
3. Buyers still need to pay an upfront fee (option fee) which is usually a substantial sum given the fact that it is a percentage of the selling price. Although the option fee is less than a typical down payment (approximately 4% in Edmonton), the amount can still be difficult to accumulate before one commences renting.
4. Most rent to own agreements are usually strict on compliance which may result in unnecessary expenses. For instance, most Edmonton rent to own agreements void rent credit for the month where a buyer is late in regards to rent payment. In simple terms, rent to own agreements can be costly if you don’t pay your rent in time.
5. Rent to own agreements can be terminated prematurely in the case of foreclosure i.e. when a seller is unable to meet their mortgage obligations. In such cases, the renter may be forced to move.
Benefits and risks of rent to own homes to sellers
1. If the value of homes is falling, sellers have the opportunity to lock in higher prices in the initial stages of rent to own agreements.
2. Renters who want to own as opposed to rent for a certain period of time generally manage homes and surrounding spaces better. This helps to maintain or even boost property value of most Edmonton rent to own homes .
3. If the renter doesn’t keep the end of their deal i.e. buy the house at the end of the rental term, the seller enjoys the option fee as well as the rental premiums. This however returns the seller to square one since the main intention of converting a rent to own house is to sell the house.
4. Sellers can’t accept any deals from new buyers who come with better offers since rent to own agreements are binding. Sellers therefore stand to lose on better offers in the future.
5. Sometimes rent to own agreements may force sellers into foreclosure especially when they are relying heavily on the renter’s ability to meet his monthly payments. When renters are unable to ease seller’s financial burdens i.e. paying an existing mortgage, sellers may have no other option other than to face foreclosure.
The above information summaries important facts and information about rent to own homes in Edmonton from a seller and a buyer’s perspective. In a nutshell, the rent to own benefits outweighs the risk from a buyer and seller point of view. You shouldn’t therefore have a problem deciding which path to follow in matters of rent to own in Edmonton.