S
sardahousing
New Member
Buying a property without a loan? This is a dream for a larger and larger slice of potential buyers who do not have the guarantees considered necessary by banks.
The interest for the “rent-to-buy" option increases along with problems in buying such as bad credit and/or waiting for better financial chances.
Even if the phenomenon isn't yet so extended, the trend is clear and is drawing some attention, especially among those who are about to buy their first home (e.g. young couples).
The formula is primarily applied to new construction homes, usually flats with 2 to 3 rooms. In Northern Italy Lombardy, Piedmont and Emilia Romagna are the pilot regions.
How does it work?
Also called "lease-to-own" or "lease purchase", the "rent-to-own/buy" option works similarly to a car lease: Renters pay a certain amount each month to live in the house, and at the end of a set period they have the option/obligation to buy the house.
Each month of rent they pay is income for the seller, while a portion of it goes toward a down payment to eventually buy the home.
An example in Italy: a newly built apartment of 80 sqm.: 10% of the agreed price is anticipated at the time of signing the contract rent-to-buy (usually the classic rental contract 4+4 years),35% in 8 years; remaining 55% is paid upon completion of sale. Although there are still some shady areas in this contractual praxis, the rent-to-buy option is like a proper promise to purchase, with an option to extend the deed.
Risks and benefits
For the buyer
Benefits: Immediate use of the property - Financing possibilities - Price Lock (i.e.: a lower price, if real estate prices are increasing)
Disadvantages: Default of the seller - All taxes to be paid at the time of rental - Obligation to purchase the property (that is loss of option fee and rent premiums, in case of withdrawal)
For the seller
Benefits: Guaranteed income (rent premiums and option fee - in case renter's withdrawal) - Better treating of the property - Price Lock (that is a higher price than in a perspective market, in case real estate prices are falling - such as in Italy since 2011)
Disadvantages: Possible financial troubles (in case of renter's withdrawal) - Obligation to sell the property (that is loss of a higher price than originally negotiated).
The interest for the “rent-to-buy" option increases along with problems in buying such as bad credit and/or waiting for better financial chances.
Even if the phenomenon isn't yet so extended, the trend is clear and is drawing some attention, especially among those who are about to buy their first home (e.g. young couples).
The formula is primarily applied to new construction homes, usually flats with 2 to 3 rooms. In Northern Italy Lombardy, Piedmont and Emilia Romagna are the pilot regions.
How does it work?
Also called "lease-to-own" or "lease purchase", the "rent-to-own/buy" option works similarly to a car lease: Renters pay a certain amount each month to live in the house, and at the end of a set period they have the option/obligation to buy the house.
Each month of rent they pay is income for the seller, while a portion of it goes toward a down payment to eventually buy the home.
An example in Italy: a newly built apartment of 80 sqm.: 10% of the agreed price is anticipated at the time of signing the contract rent-to-buy (usually the classic rental contract 4+4 years),35% in 8 years; remaining 55% is paid upon completion of sale. Although there are still some shady areas in this contractual praxis, the rent-to-buy option is like a proper promise to purchase, with an option to extend the deed.
Risks and benefits
For the buyer
Benefits: Immediate use of the property - Financing possibilities - Price Lock (i.e.: a lower price, if real estate prices are increasing)
Disadvantages: Default of the seller - All taxes to be paid at the time of rental - Obligation to purchase the property (that is loss of option fee and rent premiums, in case of withdrawal)
For the seller
Benefits: Guaranteed income (rent premiums and option fee - in case renter's withdrawal) - Better treating of the property - Price Lock (that is a higher price than in a perspective market, in case real estate prices are falling - such as in Italy since 2011)
Disadvantages: Possible financial troubles (in case of renter's withdrawal) - Obligation to sell the property (that is loss of a higher price than originally negotiated).
