Using a rent to own contract is a great way for renters to become homeowners! But just like any other real estate purchase, it’s important to use caution before signing on the dotted line! Here are some things to watch out for when buying a rent to own house in Chicago!
If you are thinking about buying a rent to own house in Chicago, it’s important to have a clear understanding of how everything will work. Understanding the process, the costs, and how conflicts will be resolved is crucial when making this type of agreement with a homeowner. As the tenant who is spending money each month, counting on the house to one day be yours, you’ll want to do all you can to protect yourself. Below are some things to be aware of when buying a rent to own house in Chicago.
Options fees are paid upfront to the owner to secure the contract. You can think of it sort of like a down payment or a security deposit. In most cases, this is non-refundable should you default on your contract. That said, paying this fee will ensure that you have the option to buy the house outright, at a predetermined price once your lease is up. These fees can run anywhere between 2-7% of the final sale price. Most sellers keep the amount low as people who can’t afford a down payment for a mortgage, aren’t likely going to be able to afford to pay a high option fee.
The amount of rent you pay each month will likely be higher than that of other rentals. This not only secures your interest in the property but in many cases a portion of your rent payments will go toward your down payment on the home. It might be frustrating paying more while trying to save up, but this is only done to protect the interests of the homeowner. If you should default on the agreement, the increased rent amounts won’t likely be refunded. Every contract is set up differently, so make sure you know where your funds are going and what you’ll really have to pay to buy a rent to own house in Chicago.
Undisclosed Problems With The House
It is important to have contingencies in the contract should something go wrong with the house that you were unaware of before. Maybe the roof leaks, but only during the summer rain and you moved in during the winter. Or maybe there is a mold problem that wasn’t brought to your attention until after you moved in. If something in the house should be defective, you should have the option to cancel the contract without penalty. Once the house is sold, and problems are found, there might be little you can do to rectify the situation.
Maintenance & Repair Costs
In many contracts, minor repairs and maintenance will become the obligation of the tenant. Larger repairs will fall on the owner. However, you don’t want to find that you are having to call the AC guy every week to fix the unit on your dime because the owner doesn’t want to pay to replace it. Disagreements like this arise all the time and by laying out clearly who is responsible for what, you’ll be able to avoid them.
Excessive Penalties & Fees
You’ll want to watch for hidden fees or charges that can be hidden in the contract. You might be penalized for paying rent one day late or find you are going to get stuck paying a fee for investments being charged to local homeowners. You don’t want the contract to nickel and dime you, racking up fees simply for living there. Carefully read through any contract before signing, making sure you clearly understand how repairs, reimbursements, and fees will be handled.
Sellers Who Aren’t Ethical
Sadly, real estate scams are a regular occurrence these days. When entering into an agreement, make sure to do your research on the title, sales history, and the owner. Make sure the person selling the house to you has the right to do so. Imagine paying someone to buy a house, only to have them skip town when you realize they had no right to enter into the contract with you in the first place. When you work with Chicago Home Buyers, you can be assured that every agreement we help to facilitate comes with a clean title. You will never have to work with unethical sellers or houses that aren’t what they claim to be. We do the homework for you so you can easily find the property that’s right for you without having to worry about being taken advantage of. Our goal is to create fair agreements that benefit both buyers and sellers.