Here’s what you need to know about the issues with rent-to-own properties.

A lot of clients have been asking me if I know about any rent-to-own properties they can look at. This immediately brings up red flags. Today I’ll talk about why rent-to-own properties can be risky for you and your family.

First off, we’re in a crazy seller’s market. This means that if someone is asking about rent-to-own properties, they probably haven’t been educated on what the market is doing. Why would a seller list their property as rent-to-own when they could sell it above asking price within seven days? It could mean hidden issues for your family. Here are three reasons to be cautious about rent-to-own properties:

1. Property owners list homes as rent-to-own to avoid an inspection. When I represent buyers, I always recommend they get an inspection, even in a seller’s market. If you’re buying rent-to-own, you’re far more likely to waive the inspection, and sellers know this. You may even think, “It’s fine. If anything goes wrong, the landlord will repair it.” However, I think we’ve all been in a situation where the landlord ignores a repair. On top of that, long-term problems like foundation issues probably won’t appear until the rent-to-own period is over. 

2. Some rent-to-own sellers prey on people with bad credit. They may agree to rent their property to you under the assumption you’ll default on the rent-to-own agreement. Then they can put the home right back on the market and make even more money. Also, people tend to move every five to seven years. Sellers may be betting you won’t be able to pay off the house in that time. 

“I always recommend you get an inspection, even in a seller’s market.”

3. Property owners usually list rent-to-own homes above their property value. Since rent-to-home buyers tend to be more eager to take what they can get, sellers know you will probably waive an appraisal. This lets them sell their property to you way above what it’s actually worth. You may end up paying tens of thousands of dollars more than you should, so be careful. 

I understand that this market is pretty rough for buyers, but rent-to-own properties come with a lot of red flags. At the very least, I’ve hopefully convinced you not to waive inspection and appraisal. If you have any questions about today’s topic or anything else, please reach out to me. I am always willing to help.