Rent To Own – Forecast Bright As Home Sales Continue To Be Gloomy

Housing remains the weakest part of the American economy, analysts tell us, and we shouldn’t expect much improvement over the next few months. “These numbers are at rock-bottom by historical standards,” said U.S. economist at IHS Global Insight, Patrick Newport. This report comes at a time of the year where home sales should be at its peak. However, while traditional home sales reports have been bleak, the rent to own market is on the rise because, for many, it’s become the only way they are able to buy or sell a home.

Obtaining definitive numbers for these types of purchases is difficult since they are private rental agreements with a purchase option until later recorded as a home sale when the transaction is completed, often 2-3 years depending on the agreement terms. But indicators of increased on-line searches, books and documents sold, as well as general inquiries throughout the real estate and mortgage industry show that interest is strong and many rent to own transactions are being generated.

For many home sellers who’ve had homes on the market for many months with little or no activity, the immediate interest generated from one rent to own advertisement can be overwhelming. Today’s market is flooded with better-than-average risk buyers whose credit issues are recent due to current market and economic circumstances, but previously were responsible and timely with their obligations.

With a bankruptcy or foreclosure would-be buyers are unlikely to qualify for a home loan for some time, and with the great increase of home-owners-turned-renters, the price of rent continues to increase. A rent to own home agreement fixes the cost of rent for the specific period of the agreement, giving buyers another incentive to buy.

Wednesday, June 22, Federal Reserve Chairman Ben Bernanke said the housing market was a strong and persistent factor hurting the broader economy. With the continuing vice-like grip on traditional lending and increase of the rent to own home trend, it would not be surprising if the federal government at some point were to identify this trend as a viable way to increase housing sales, and possibly offer incentives and tax benefits for these types of purchases, and strengthen protective regulations for both buyers and sellers.

It could also be to the benefit of real estate agents and brokers to be willing to facilitate these types of sales, although it would mean a delay of their primary commission for 2-3 years. Frequently real estate professionals will provide property management services during the lease period, since most property managers are real estate brokers. They can charge an up-front fee for providing initial services; paperwork, credit and background checks, bringing in a buyer or seller, etc., and if they choose, they can administrate the monthly payments for an additional monthly income until the sale closes in 2-5 years.