A rent-to-own agreement is a deal in which you commit to renting a property for a specific period of time, with the option of buying it before the lease runs out.Rent-to-own agreements include a standard lease agreement and also an option to buy the property at a later time.Lease-option contracts give you the right to buy the home when the lease expires, while lease-purchase contracts require you to buy it.

You pay rent throughout the lease, and in some cases, a percentage of the payment is applied to the purchase price.With some rent-to-own contracts, you may have to maintain the property and pay for repairs.

Agreeing on the Purchase Price

Rent-to-own agreements should specify when and how the home’s purchase price is determined. In some cases, you and the seller will agree on a purchase price when the contract is signed, often at a higher price than the current market value. In other situations, the price is determined when the lease expires, based on the property’s then-current market value. Many buyers prefer to “lock in” the purchase price, especially in markets where home prices are trending up.