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What Should Be Included in a Rent to Own Agreement

Rent to own agreements have become increasingly popular as a way for individuals or families to purchase a home without having to save up for a large down payment. These agreements are a form of seller financing where the buyer pays rent on the property for a specified period of time and then has the option to purchase the property at a predetermined price.

If you are considering entering into a rent to own agreement, it is important to understand what should be included in the agreement to protect your interests as a buyer.

1. Rent and Purchase Price – The rent to own agreement should clearly state the monthly rent that the buyer will be paying and the purchase price of the property. This will help the buyer to budget for the monthly payments and understand the total cost of the property.

2. Option Fee – The option fee is a fee paid by the buyer to the seller for the option to purchase the property. This fee is typically non-refundable and is applied towards the purchase price if the buyer decides to exercise their option to purchase.

3. Terms of the Lease – The agreement should include the terms of the lease, such as the length of the lease, the amount of the security deposit, and any late fees or penalties for non-payment.

4. Maintenance and Repairs – The agreement should clearly state who is responsible for maintenance and repairs during the lease period. Typically, the seller is responsible for major repairs and the buyer is responsible for minor repairs.

5. Default and Termination – The agreement should include the conditions under which the agreement can be terminated by either party and the consequences of default by either party.

6. Closing Costs – The agreement should specify who is responsible for paying closing costs, such as title search fees, recording fees, and transfer taxes.

7. Title and Ownership of the Property – The agreement should clearly state who holds title to the property during the lease period and who will hold title after the purchase is completed.

In conclusion, rent to own agreements can be a great option for buyers who are unable to obtain traditional financing. By understanding what should be included in the agreement, buyers can protect their interests and ensure a smooth transaction. It is important to consult with a real estate attorney or experienced real estate professional to ensure that the agreement meets all legal requirements and protects your interests as a buyer.