RENT-TO-OWN: HOW YOU CAN MAKE IT POSSIBLE

Looking for the alternative way to purchase a home than rent-to-own or lease-to-own may be what you are looking for but beware of the pitfalls along the road to ownership.

Put simply rent-to-own is where you rent a home for a certain amount of time, with the option to buy it before the lease expires.  A rent-to-own agreement has two parts: a standard lease agreement and an option to buy.

Here is how it works:

1) You pay the seller a one-time fee, a nonrefundable upfront fee, called the option fee.  The fee is often negotiable and can range between 1% to 5% of the purchase price.

2) The rent-to-own agreements should specify when and how the home price is determined and you and the seller will agree on the purchase price when the contract is signed.  As the buyer, you should try to "lock in" the purchase price, especially if your area market housing prices are trending upward.

3) Determine what portion of the rent you pay will be credited towards the purchase of the home.  In this situation rent will be slightly higher than the going rated to make up for the rent credit you receive, so be sure what you are getting for the premium you are paying.

4) Home maintenance and the cost of repairs may be your responsibility during the rent-to-own agreement.  The seller is ultimately responsible for taxes, insurance, and homeowner association fees.  You should have a separate renter's insurance policy to cover losses to personal property and provide liability coverage in the event someone is injured while in the home.

5) When the lease agreement expires, and you still want to buy the property you will need to obtain a mortgage to finance the purchase of the home.  Should you opt out and not buy the property, when the lease expires you will have to move out of the home, just as if you were renting another property.  You will forfeit any money paid up to that point, including the option money and any rent credit earned.  You will no longer be obligated to continue renting or purchasing the home.

Note: Before entering any rent-to-own agreement, have the contents of the agreement reviewed by your attorney before signing.  Be certain you understand all the conditions of the rent-to-own agreement - both yours and the seller.