Renting to Own: the good, the bad, and the ugly

In the past couple weeks I've had a few different people ask me about renting-to-own, so I decided to make this post be all about renting-to-own, so if you're currently thinking about entering into a rent-to-own agreement, the following information should help you make a well-informed decision whether or not it's something you should get into.

The Good -   parts of this section are courtesy of www.irex.ca/library_rent_to_own.html

Rent To Own A Home, House On Hold
"Renting-to-own" a house is a very complicated process and normally takes place outside of organized real estate. Because there isn't any down payment, there is no commission until some hypothetical time in the future. Renting-to-own a home involves having your landlord, after securing an agreement to purchase with an agreed-to price and closing date, place part of your rent on deposit. In order to get a mortgage, your bank may need to see that the amount that is set aside for down payment is above the normal market rent for the property. (i.e. if normal rent is $800 and you're paying $1100 per month, the other $300/month is set aside for your down payment). The reason the bank may look for this is to ensure that the down payment didn't come about as a result of a kickback from the seller, unknown to the bank, with a corresponding "false" and inflated house selling price to make up the difference. This would be a case of fraud. This is one reason that banks have a home appraisal completed.
Other problems include the potential inconvenient answers to these questions, which have to be dealt with in the offer to purchase, or they will blow up later.
What happens if the market price of the home is less than I originally bargained for? Can I get out of the rent to own deal?

How can I predict what the interest rates will be in order to raise the amount of mortgage I will need at that future time?

Can I still get a mortgage if the interest rates go up for all that I need?

Will I get my money back if I can't raise the mortgage?

What happens if the market price of the home is higher than what I originally bargained for?

What if the seller doesn't want to sell since he knows its' worth more than I bargained for?

What about things that go wrong with the house between now and then?

What is essentially happening in "rent to own" is that the landlord (seller) is saving money for you. This is something buyers can do on their own and maintain the flexibility of picking from many homes while working with a realtor at a time after pre-qualification takes place, which may or may not include the subject property.

The Bad -

In Nova Scotia, until the "closing date" occurs, the purchaser is still covered under the residential tenancies act, which means that each year, the lease must be renewed, which also means that each year, the purchaser has a chance to walk away from the deal, leaving the owner stranded, and back to square one.

I would also like to point out the potential for damage to your property; what happens if the tenant moves out and has caused more damage than his security deposit is worth?  The small claims court process in Nova Scotia takes much longer than most people think it should.

The Ugly -

Before entering into a rent-to-own agreementm be sure to do your homework.  As an owner, you want to make sure that your purchaser/tenant is well-qualified and can show you proof of that.  You also want to make sure that the purchaser/tenant is someone you can trust to live in your house.  The worst part of rent-to-own agreements, is the fact that owners quickly lose sight of the fact that they are now landlords, and have duties as such.  Not everyone is cut out to be a landlord.


Hopefully this answers some of your rent-to-own questions, and thanks for following.

Word-of-Mouth: makes or breaks.

In real estate, like any other business, word-of-mouth can either make or break you.  When I think about what it is I want people to be saying about my work, one personal experience comes to mind.  I am going to share that experience with you.

A few years ago, I had a car that the heater core broke in.  It happened on a Saturday morning, and in the Valley most repair shops close early on Saturdays.  I called around to a few shops, and one had space available to take a look at it and get it fixed up so the car would be driveable until the middle of the week when a replacement part would arrive.

To replace this particular part, the entire dash has to be removed, so it's quite a lengthy (and expensive) job!

The middle of the week came, and I dropped the car off in the morning back at the shop.  I picked it up later that day, paid the (very expensive) bill, and headed for home.  Sitting at a set of lights I noticed there were huge scratches on both the panels between the windsheild and side windows.  very scratched as well.  Then I noticed the center console was This was not acceptable to me, I had just paid nearly $1000, and now my car was damaged.. so what did I do?  I called the shop and spoke with the manager.  He was very understanding, and asked if I could come back to the shop and show him.

Upon arriving back at the shop, the mechanic who did the work on the car earlier that day was still there, and not very happy to see me back.  The manager however, took a look at the damage and offered to pay for the repairs.  We went to a local auto detailing shop to see what could be done.  Unfortunatley, nothing, the scratches were too deep.

So he (the manager) asked me what it would take to make me walk away a happy customer, and I told him I wanted the damages repaired.  Seeing how the damage was irrepairable, the only other option was to replace the panels and center console.  So he ordered the parts (brand new) from Ohio.  He (the manager) called me when the parts were in, and installed them for me.

The moral of this story is this:  even though I got off on the wrong foot with this business, the manager did everything he could to make sure I walked away a happy customer.  Still, more than three years later, I go to that very same garage.  Some people might think I'm crazy, but the way I see it is that the replacement parts the manager paid for actually cost more than the work I had done.  He could have told me to go pound sand; tough luck.  But he didn't.  He wanted me to walk away a happy customer.  Because of that, I consider myself a customer for life there. 

I'm not saying every wrong can be "righted", but if you can make an effort to show the wronged person that their review (personal opinion) is worth more than a doller figure, that really goes a long way.

I recommend that garage to everyone.  All because I was taken care of; not just a source of income.  


As an agent, my biggest goal is to deliver exceptional service to my clients.  Each day I'm finding more and more ways to make that possible.  For most clients I have already dealt with, returning phone calls in a timely fashion and staying in communication consistently seems to be more than enough.  But with me it doesn't stop there.  In dealing with clients and potential clients, I'm not pre-screening for that commission cheque up ahead in the near future - I'm listening, and doing everything in my power to deliver appropriatley.  This is a business where it might take a while to get that commission cheque - so in the meantime you might as well do the best job you can, and build a solid relationship with that client, because there's more than a hundred other agents who'd love to have a crack at it. 

Leah Conrad - the best is the least I can do.