You can rent a house. You can buy a house. Or you can do both.
Rent-to-own - a contract that gives a renter the option to buy at a set price - is a niche part of the housing market. But it is one that more would-be sellers might consider in these slow times.
Be aware, though, that you will have more issues to work through than you would in a straight rental or regular sale.
You will want a contract, most likely one put together by an attorney, said Barbara Nichols, a California real estate broker who wrote The No Lawsuit Guide to Real Estate Transactions. In it, note the term of the lease option - how long the renter can rent before he or she is obligated to decide whether to buy - and the sales price. Normally, an agreed-upon portion of the rental payment is applied to the down payment.
The renter/buyer should have a property inspection done in advance, she said. You do not want nasty surprises about the roof after two years of accruing a down payment on the place. For everyone's sake, agree in the contract who will be responsible for maintenance and repairs, Nichols added. Note what recourse the landlord has if the renter damages the home and bolts, and what recourse the renter has if the landlord stops paying the mortgage.
Reisterstown attorney Marc Appel also suggested including a clause in the contract saying the purchase is contingent on getting financing.
The handful of calls that Baltimore Neighborhoods Inc. gets about rent-to-own are from tenants upset by the way things turned out.
"A lot of times, the lease agreement is not really that clear," said Stephanie D. Cornish, program manager for the nonprofit's tenant-landlord counseling department. There might be just a sentence to the effect of "you have the right to buy."
Tenant-buyers should have a lawyer look over the contract before signing, said Appel, a partner with the law firm Waldman, Grossfeld, Appel and Baer and a panel attorney for Baltimore Neighborhoods.
So let's say you have a clear contract. Is the rent-to-own concept a good idea for you?
"It won't make sense for a seller if the prices are going up because, obviously, you're locked into a lower price," Nichols said. "It does make sense for a seller if the prices are going down."
In that case, the renter will want to think twice, she said.
Find Jamie's blog at baltimore sun.com/realestatewonk.