Homeowners, are you wondering if it’s a good idea to enter into a rent-to-own agreement with a potential buyer?
At Mitten Made Properties, we’ve been working in real estate in Metro Detroit for quite some time. Along the way, we’ve seen home sellers make rent-to-own arrangements to both beneficial and disastrous results.
While there are some perks for sellers in rent-to-own arrangements — such as having a bigger pool of potential buyers, earning rental income, and selling for a higher price-point — there are also some little-known (and pretty big) pitfalls.
In the list below, we outline some of the risks Michigan home sellers should be aware of before making rent-to-own arrangements.
No Guarantee of Purchase
Remember, buyers can back out of a rent-to-own agreement whenever they want – and they often do. Indeed, sometimes living in the home as a rental makes buying the home less exciting, especially if they decide they don’t really like the floor plan or other details, and so they may decide not to follow through with the purchase. You’ll still get to keep the extra money they paid you, but it’s not ideal if you’re in a hurry to sell. Not to mention you’ll need to find a new buyer.
Unexpected Market Fluctuations
If you rent-to-own and then the market fluctuates in your favor, you’ll miss out on that appreciation. Similarly, if the market takes a downturn and then the renters back out, you’ll be stuck with the property in a less profitable market.
Repairs are one of the biggest risks to having tenants in the home you intend to sell. Your buyers might uncover problems – or create new ones – that you have to pay to fix while they’re renting. If your HVAC unit kicks the bucket while the buyers are still in tenant status, that’s your (very expensive) issue to fix. Or your tenants might damage the home or property while they’re living in it – and then back out of the agreement altogether. At that point, you’ll be faced with doing renovations just to get your home back in the shape it was in before you entered the rent-to-own arrangement.
With diligence, rent-to-own can work in some cases – but it is ALWAYS a risk. Mitten Made Properties offers an alternative way to sell your Southeast Michigan home fast. We seal the deal on local properties for a fair cash price in as little as two weeks, completely as-is (no repairs or cleaning!), and we’ll even pay all the closing costs. Give us a call at (248) 883-3340 to see what we can offer for your Metro Detroit home!