GrapeEater

I am very curious of the "rent to buy" schemes creeping into the post-credit-crunch tactics by Real Estate agents.

Are they pukka? Does anyone know of such schemes, used them even run them?

In a nutshell, as I understand it, a Seller, rents out their house to a Tenant/Potential Buyer for a long term period (11 months+) with an option to buy after/during the rental period. The paid rent is deducted from the agreed sale price. Sometimes a large retaining (no-refundable) deposit is paid by the tennant/buyer to secure the option to buy later.

Why? I think it helps the Seller release their property so he/she can move on to pastures new and helps the 'tenant/buyer' try before they buy... which seems to make sense to some people in these austerity ridden days or help shift hard-to-sell property.

I can think of a few issues / questions about this approach, perhaps one to avoid? But I wondered if this is popular scheme in your area? Or maybe you are in one right now.

Please share your knowledge or opinions

fionamw

It's that which is the killer crunch. We've been looking on and off for more than a year (though not too hard) to find somewhere nearer the coast/school. Found some brilliant new houses, would really give thought to living there but wanted to rent first. I asked the company (also the developer) and in principle they don't rent their properties but I asked about alquiler con opcion de compra and she ummed and aahed and said yes the possibility does exist but the upfront fee/deposit would be around 20,000E (lost my euro sign in re-formatting). We could have coped with losing the monthly rent - you do that whenever and wherever you rent. But a five figure sum was the nail in the coffin of that idea.
Strange thing is although they've dropped the prices of the properties, we know for a fact most of them still remain unsold - you can see because the power lines are hanging, etc. Some sold but MOST unsold. Yet they put massive hurdles in the way of anyone showing interest. I've emailed, etc., they must know we're more than just asking. Anyway ho hum.

jdr

There must be thousands of places where people are trying to sell, most with no luck so rental is the next best thing.
I am sure they would bite your hand off if you asked them about option to buy if you liked it.

paintermujer

We have the option to buy clause in our rental contract.

Our house was built in 2006 and remained empty until we moved in in April of this year. The houses either side of us are all occupied but I think the crisis kicked in and one house was left.

Our landlord is a retired builder now and its good for him that the house is being used at last.He has a good reputation in the town.

I really want to take advantage of this option when the time is good but we do need to do a bit of price negotiation because the house is overpriced but is in a pertect location.Its in town,just 5 mins walk to anywhere but we have campo views to the front for now.And its big. We were told by all other letting agencies that what we were after didnt exist-but it did.

paintermujer

I should add that we paid 2000 euros deposit.He wanted 3000 but we knocked him down.

jackytoo

A lot of developers on the coast are offering this scheme. Heard it's popular with young Spanish couples. The snag is they are seriously overpriced eg. 195,000 euros and re-sales are asking 140,000.

spainrico

We are currently renting out a house to a tenant who has a rent to buy contract with us. He pays a monthly rent deductible from the agreed purchase price. We did not ask for a large amount up front, just the normal rental deposit. Effectively the landlord is providing a 'mortgage' until the tenant can secure a loan from a bank or accumulate sufficient capital to purchase outright from another property sale or wherever.
It is an advantageous arrangement for both parties.

GrapeEater

What are the risks?
Seems very risky for the tennant who could lose a BIG deposit id they decide not to buy / circumstances change or maybe can't get a mortgage?

Does the NOTARY have to be informed?

spainrico

No our notary would not notarise our contract (talking about the arrangement we made with a potential buyer) as it is private and does not involve purchase taxes etc - an actual sale agreement with completion date etc would be the time for the notary. Whilst holding a large deposit from the buyer would be nice I don't see how it is justified as it is rent with OPTION to buy later. I would not recommend anyone to pay a large deposit under this type of arrangement unless they are 100% sure they will complete the purchase.

GrapeEater

Yeah - I think I would run if I was asked for a BIG deposit - too risky for me. If it was just the usual 'bond' deposit and monthly rent then I think that is fair.

I hears that some agents are taking a cut of the deposit as well as the rental set-up fee.

EVen with a contract I suppose the Seller might pull out through change of circumstances or maybe find a cast iron buyer - yep that'd be breach of contract - ... overall sounds complicated for most people.

Fair enough if you have viewed the house, know the area / location or have a cash flow problem then it might suffice but too many ifs and buts for me!

I dread to think that after a short while the renter decides the place is not right, has problems, don't like neighbours and has to default of the deposit.
:-(

snikpoh

Everyone who has a (long-term) rental agreement has the 'option to buy'!

What I mean is; if the landlord subsequently decides to sell the rental property, then the current tenant MUST have first refusal to purchase.

I know this is not quite what the OP meant but I thought I would clarify.


In this area, this scheme doesn't seem to be catching on. My properties are all "rent-to-buy" but I haven't had the slightest interest yet. Agents I have spoken to say that people are not interested in this area.

paintermujer

Our house was up for sale for 5 years and the builder only put the house up for rent just as we were looking for a new place.We were very lucky.

Its not that the house is in a less desirable position or anything like that- in fact its in the most desirable area of town but the price was high and I guess because of the crisis nobody had the money anymore to contemplate such a purchase.

We wouldnt pay the asking price which he sold the 3 others for.Times have changed and will probably change even more over the next 4 years so we expect him to be a bit flexible in the future.

licinius

Rent to buy = interest free mortgage!

It's a no brainer, every penny you pay comes off the purchase price but as soon as you buy you have to pay interest. I'm on one such deal & the builder keeps asking me to go speak to the bank as I've already paid off a sizeable chunk, but why should I? If there are problems with the house, I'm still a tenant so he has to repair it. I've basically told him that I'm more than happy with the existing set up so if he wants me to buy then we need to renegotiate the purchase price.

When interest rates start to rise I reckon they will soar out of control, so I'll stay right where I am paying the exact same amount every month regardless

Tinky

I thought the amount going towards the purchase prize was on a sliding scale; 1st year 100% of rent, 90% if bought after 2 years and so on? At least the ones we have looked at worked this way.

stuboy

How do you keep track of it, is the price fixed for a period of time. do you get anything like an equity certificate, can he sell it on?