Sellers who can’t unload their properties through a conventional sale are proposing rent-to-own deals more frequently these days.

For sellers, the advantage of rent-to-own is the likelihood that the renter will eventually permanently take the property off their hands. For buyers, rent-to-own can provide the credit-challenged or cash-strapped a route to homeownership.

But for buyers and sellers, there are also many potential drawbacks. If your customers are considering a rent-to-own deal, here are some smart questions they should consider.

 For sellers:

• Who will tend to the property and pay for routine maintenance?

• Who pays for major repairs?

• What are the costs of setting up and managing an escrow account for the portion of rent allotted to the downpayment?

• Will you manage the property yourself, or hire an agent?

• What if the renters change their minds? Who keeps the money in the escrow account?

• If the buyers change their minds, what will be required to put the property back on the market?

For buyers:

• How much of the rent is going to the downpayment?

• How locked in are you if change your mind? What will it cost you to get out of the deal?

• How long will it take to accumulate enough of a downpayment that you are likely to qualify for a mortgage?

• What happens if you don’t qualify for a mortgage by the specified deadline? Can you continue to rent?

• Who will be responsible for routine maintenance?

• Who will pay for major repairs?

• Do you hope to strengthen your credit rating by paying rent on time? If so, will the owner report your good habits to credit bureaus?

Source: Milwaukee Journal Sentinel, Joanne Cleaver (09/22/2007)