This confusing topic generates numerous inquiries, especially now when looking for ways to be creative can make all the difference. The common rent-to-own concept is that a tenant can increase their rental payment and have a portion applied toward the down payment on an eventual purchase. While this is entirely possible, there are reasons this may not be the best arrangement for buyer/ tenant or seller. Absent a formal recorded agreement, either party can change their minds and terminate the agreement at any time. Seller can even sell to another party without the buyer/tenant knowing. The buyer may find it difficult to recover their investment if this occurs. Conversely, sellers have no assurance a tenant will ever perform. The buyer has little invested. It takes so long to accumulate enough to make a real contribution toward a down payment that buyers often give up. Having possession of the property over time tends to makes the future purchasers critical of the property. They often wish to renegotiate price. A more appropriate arrangement is a lease-option. This is a formally recorded arrangement detailing the complete agreement that could eventually lead to a sale. A non-refundable up-front deposit is required as "option" money. It can be any amount but is usually much more than a rental deposit. Remember, rental deposits are refundable, option money is not. This gives the tenant a sense of ownership so renegotiations are less likely. Because the lease-option is recorded at the Bureau of Conveyances, the buyer is protected against a competing sale. It becomes an encumbrance on title and may affect the seller’s ability to mortgage the property or use it as collateral. Lease-options in residential transactions are considered a form of creative financing. They are normally considered as a last resort. Buyers like them because it moves them into the property for less money down. Lease options are a tool to freeze pricing. Sellers like them because it assures an eventual sale and failing that, they get the property back without a long legal proceeding. It’s certainly an important tool to consider in today’s market. Consult your REALTOR®. We still have several conventional alternatives that will work for most buyers but when all else by all means, be creative. Just be sure that an option to buy doesn't end up being a case of rent-tp-be-dissapointed.