Some buyers are using rent-to-own deals to lock in home prices while waiting for better financing. Rent-to-own offers flexibility and negotiation benefits.
NEW YORK — Affluent home buyers are increasingly interested in rent-to-own transactions, but not because they are unable to afford a down payment. These agreements can give buyers of high-end homes an opportunity to stabilize the price of a home while waiting for potentially better financing options. This approach allows buyers to live in the property and delay the purchase until borrowing costs decrease.
There are two common types: lease-purchase agreements, which require buyers to buy at a fixed price, and lease options, which give buyers the choice to purchase. Developers also use rent-to-own deals to move inventory in slow markets, as tenants pay rent while potentially committing to a future purchase. This setup benefits buyers by offering a “test drive” of the home, allowing them to identify any construction issues before committing fully.
Rent-to-own transactions also give buyers a powerful negotiating tool, as seen in a recent Bel-Air, Calif., estate deal, where part of the rent was credited toward the purchase price. However, there are risks for both buyers and sellers, such as nonpayment of rent or the buyer deciding not to purchase.
Sellers should carefully manage maintenance responsibilities and consider protections like nonrefundable fees and first-right-of-refusal clauses.
Source: Wall Street Journal (03/02/25) Friedman, Robyn A.
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