Is this a rent to own rip off or is this legit??

A rip off.

All a rent to own agreement gives, is you all of the obligation and the landlord all of the rights.

You usually end up paying more monthly, than you would on a regular rental or a house payment.

You end up putting about the same deposit down as you would on a house.

At the end of the one year, if you do not buy, you LOSE all of you deposit, plus any money that they were going to put toward the downpayment....that is the difference between a rental and an RTO.

The landlord still gets left with the property.

Very, very rarely is the buyer able to finish the transaction b/c in 1 to 2 years they still have high debt, poor credit.

If you cannot afford to buy right now, then you cannot afford to RTO.

2

all RE is local! in a high demand city with little depreciation going on this might be a good way to get into a house while you build up your credit, save money, or just try out the neighborhood....

In an area where values are declining and there will continue to be foreclosures it will LOCK you into a sale price as of the date you sign this Purchase Agreement and the townhouse may be worth LESS than others that will be for sale at the time you must exercise the option to purchase.

Usually though, you're supposed to be paying X for the rent plus something else towards the down payment on top of that, non-refundable. so if you're gonna be paying whatever the current market rate is and it will still apply 10-20% towards your dn pmt, then you got nothing to lose!

It could be legitimate. What you're describing is about right. In fact, some elements of it are pretty good.

Usually, in a lease-option you're asked to provide some up-front money--not rent, not a security deposit, and not a downpayment. Instead, it's an option fee, often in the range of 2%-4% of the value of the property. If you exercise the option, it's credited to your purchase price (or downpayment). If you fail to exercise the option, you forfeit it. As you've described it, you're not being asked for any up-front option fee. That makes it less risky for you.

In many parts of the country, a 20% option credit is considered typical. Anything above that is pretty generous.

However, recognize that without an up-front option fee, and with only the rent credit over the course of a year, you're not going to build up much in the way of option credits for a downpayment. Assume your rent is $2,000 a month, and 20% is credited toward the option fee. That's $400 a month, or $4,800 over the course of the year. In my area, $2,000 in rent will rent a house worth roughly $500,000. Your area may be different. While $4,800 is real money, it's less than 1% of the purchase price. Or it's only 10% of a 10% downpayment.

Yes, a growing number of homeowners are selling (or trying to sell) using lease options. Even a couple of years ago, when I called sellers, I could get about 20% to agree to a lease-option. Today, it's well over 50%.

As another comment suggested, make sure there's a specified price. And, in today's market, you want to make sure that price is about what the house is worth today, or less.

A few other things you need. (And you can Google these for more information, or contact me.):

Authorization to Release Information: A document (or documents) that the seller will sign allowing you to contact his lenders to verify that he's making payments on the mortgage. I answered another question on Yahoo earlier today from someone who was lease-optioning a property and the owner filed for bankruptcy. You don't want that.

Notice of Agreement: This is a notarized document signed by you and the seller that you then record at the deeds office in your city or county. It "clouds the title" and makes it difficult or impossible for the owner to sell without your approval.

Provisions to extend the option: What if, at the end of the year, the house won't appraise for your strike price? Or what if you need a couple of extra months to save up some more money. These provisions protect you by allowing you to extend the option by the payment of some additional money.

Have a real estate lawyer review the documents to make sure you're sufficiently protected.

There's lots more, but that should get you started.

Hope that helps.

Most are not scams, but each have their own terms and that is what you have to pay attention to when signing any paperwork. I sell all of my properties Rent-to-Own and its a win / win situation for everyone.

Basically, before buyer moves in, buyer pays 1st months rent and a lease option fee around $2-5K depending on the property sales price. We determine an appropriate time frame for the lease (1-3 yrs) and they move in.

I have my buyers that have less than perfect credit speak with my broker and they advise on how long it will take for the buyer to clear up their credit report; which establishes a lease time for us to write up. It's usually 1-3 yrs.

If you would like a list of my properties available for rent to own or more info about how I work, please see my Web site. 3 W's rentobuyhomelist dot com

Julie

julielotten@gmail.com

Is it 10% or 20% that will count as down payment? Is the price firm? What about terms? Who pays what at closing?

In other words, a rent-to-own can be legitimate if it is done properly but it is risky if not done correctly.

If the seller is going to write up the document, hire a good real estate attorney to review it for you and make any changes needed to protect you. This is imperative!

Be sure the property is priced correctly. Also be sure any underlying financing is in good standing.

As an underwriter for the mortgage business......

I have yet to be able to approve one of these (20 years). The issues are at time of purchase and being able to document the "down". The bank I work at only allows the difference between the fair market rent and what the tenant was paying.

For instance if rents in your area for that house are $1,000 per month and you're paying $1,200 per month, we would only take the $200 per month as your down. It doesn't matter what the agreement (10-20% per your notes) was.

Just be careful, and keep all documentation. Cancelled checks, everything.

The sales price and terms would also have to match the curent market. Sales price could not be higher than appraised value at time of purchase.....well okay, it could be, but then you'd have to come in with the differance.

This is legit. Make sure all of the details are in writing. A lot of sellers are doing this today to make it easier for people to buy their property.

There should be some indication of the price you will pay at the end of the option period.

Good luck.

This is a scam. There is absolutely no doubt about it. Please report the ad to craigslist and to the local police department in the town where the supposed house for rent/sale is located as there are legitimate owners who are not aware their property is being used as bait in a fraud. Scammers take homes for sale from internet sites and list them as bait. If you contact the realtor/agent of the house, they will inform you they have no knowledge of the person who sent you this e-mail. Don't be a victim of fraud!

Freedom Rent To Own