A rent-to-own strategy could be a legitimate way for a would-be buyer with a lower credit score or a smaller down payment to realize the dream of becoming a homeowner. In short, this arrangement allows someone to live in a house as a renter with the intent to close on the home at a future date.
If you’ve decided a rent-to-own home could be right for you, you’ll want to make sure you’re clear on all the pros and cons. And you’ll need to understand the logistics for your specific arrangement.
Important among them: who handles any maintenance issues, and what are some biggies that might make you consider walking away instead of moving forward with this rent-to-own home? Our expert-backed primer covers all the maintenance questions buyers should be sure to ask about a rent-to-own home to help you avoid any difficult and potentially expensive situations.
Why do buyers need to worry about problems in rent-to-own homes?
Well, that’s a pretty simple question to answer.
“The biggest reason why buyers have to worry about rent-to-own home condition is because that home will be theirs, officially, once they own it,” says top-selling Florida-based agent Kathy Aparo-Griffin. “So they’re going to have to deal with these issues.”
The specifics of that rent-to-own arrangement “all depend [on] how the agreement is written,” Aparo-Griffin explains. One common (but not always standard) inclusion in a rent-to-own contract is asking the buyer to handle any repairs needed while they occupy the house.
This stipulation has an upside for the buyer, too: if they are “going to treat their home as if they already own it, then any roof leak, nonfunctioning AC, any of that is going to be a problem in the future when they go to technically own it and get a mortgage and get rid of the seller from the transaction,” the agent notes. Taking care of any maintenance issues proactively will benefit the buyers long-term when they become homeowners.
Indeed, Aparo-Griffin says, “usually it’s the buyer” handling these responsibilities and costs in a rent-to-own situation.
“If you’re doing a rent-to-own, you are technically a vested, soon-to-be owner. So you have to treat that place as your own. It’s always up to the real estate brokerage firm that’s writing up [the rent-to-own agreement] to clarify that, but for the most part, it’s usually on the buyer.”
However, that’s not always the case. “I have written up some rent-to-owns where the seller is responsible up until a certain time period when the buyer actually gets a standard loan,” Aparo-Griffin says. So you have options!
Standard maintenance issues for buyers to expect
Every home comes with standard maintenance matters that owners — or owners-to-be — should keep top of mind.
Here’s a general list of things to think about.
Cleaning out the gutters
Who’s responsible for doing this, and when will it be done? Homeowners should remove any debris from their gutters and clean them out annually.
Clogged gutters can lead to roof damage — an expensive repair — so this ounce of prevention can save buyers significant money long-term.
Replacing air filters
Who performs the task, and who pays for the filters? Air filters range in price depending on the size and thickness of the filter. Thinner filters are supposed to be replaced monthly, while thicker filters can last up to a year (and are more expensive).
Dirty air filters waste energy because your systems have to work harder; they can even cause your HVAC system to overheat or malfunction. And, of course, replacing air filters will maintain good air quality in your home.
This may include mowing and watering the lawn, and generally keeping up the landscaping around the property.
Is this the responsibility of the buyer or the landlord, and at whose expense? Is there a professional service that handles this, and who arranges and pays for it, if so?
Landscaping isn’t simply a matter of curb appeal. Paying attention to how water drains around the home when you’re watering the lawn, for example, can alert you to structural issues with the house before they become acute.
Cleaning the fridge coils
First, you’ll want to establish whose fridge it even is: will it eventually come with the house and pass to the rent-to-owner if it belongs to the seller?
Cleaning the fridge’s coils helps the fridge operate at maximum efficiency, so maintaining this part of the house will save the renter and future buyer money on their energy expenses. Plus, if the fridge is coming with the house, buyers will want to make sure it’s operating at peak condition, anyway.
Clean the dryer vent
Again, who owns the appliance in the long run, and who is responsible for it during the rental period? This is another example of a fix that can save buyers money on their energy bills, but backed-up lint and debris in dryer vents can also start fires. For $11 on Amazon, you can order a vacuum attachment to help you handle this maintenance job.
Other standard maintenance tasks
Other tasks for which to establish responsibility include such home maintenance issues as:
- Servicing the furnace (annually)
- Flushing the water heater (annually)
- Touching up exterior paint (as needed)
- Caulking windows (as needed)
- Minor plumbing repairs (as needed)
Major maintenance issues that could change the game
Aparo-Griffin says she’d likely write in the contract that all of the maintenance issues under a certain dollar amount would fall to the buyer.
But that said, there’s a limit to what a buyer should be expected to handle in terms of home maintenance, she adds.
“Obviously if the roof is bad, you can’t expect somebody who’s renting to own to pay for a $10,000 roof.”
(She adds that if the parties do agree that buyers will be shouldering major home-maintenance responsibilities, the buyer must waive or remove any existing inspection contingencies prior to taking possession of the property.)
Let’s further consider that roof example.
“Some of the major issues that we run into a lot in Florida are that we have problems with roofs all the time because of hurricanes, hail, tornadoes, you name it,” Aparo-Griffin says. “You could need a whole new roof. You could have a leaking roof. I was in a house two weeks ago where water was pouring down the wall in the garage.”
So fundamentally, “the roof issue is a big one,” she explains — the biggest rent-to-own home maintenance concern, in her assessment. “You have to make sure you have a good roof because at the end of this, when the buyer goes to get financing, the buyer’s not going to be able to do that if the roof is an issue.”
Lenders want to confirm that the house is safe to occupy, and buyers who are hoping to get a VA or FHA loan for the house will need to ensure the house meets FHA or VA standards for safety and condition, too.
In short, examining potential costly future issues (especially the roof) “is probably the most important thing that needs to be done before you execute a rent-to-own contract.”
What are some of the other major issues that might make a would-be buyer want to walk away? Think extensive electrical issues, expensive plumbing repairs, widespread window or door replacements, or an HVAC system that needs extensive repair or even replacement.
What else to know about rent-to-own home maintenance
The home should be on a service plan during the rent-to-own term, which is in both the seller’s and the buyer’s best interests.
“You should have a once-a-year maintenance check and specify who’s going to pay for that, so as a seller you know your investment is protected,” Aparo-Griffin explains. “You know the buyer’s not going to get in there and run it into the ground.”
Remember that while the rent-to-owner is renting, the seller still owns the property. So the seller must carry homeowners’ insurance, and both parties will want to specify who’s going to pay the insurance deductible.
“If it’s a rent-to-own, the most the buyer could get is a rental [insurance] policy,” Aparo-Griffin notes. “But the homeowner still has to have homeowners’ insurance. If there is a fire, if there is a claim, if there is a hurricane, the buyer can’t make a claim. It’s not their home yet.”
So make sure to button up that insurance issue as one part of the essential home maintenance matters you’ll definitely want to clarify when entering into a rent-to-own home arrangement.
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