Rent-to-own agreements are convenient for buyers depending on their circumstances. However, can a seller back out of the agreement? Read on to learn more.
Rent-to-own agreements can be a convenient path to homeownership for buyers who aren’t quite prepared to purchase when they find a home they fall in love with. Instead of buying the home with cash or mortgage financing, buyers may sign a rent-to-own agreement with the current owner. This allows them to move into the house as a renter and make a monthly rent payment that goes toward the cost of the home.
Sometimes, however, situations arise where sellers need a way out of this agreement. So, can a seller back out of a rent-to-own agreement?
There are certain circumstances when home sellers are well within their rights to cancel a rental agreement. If you're a seller considering accepting a few months of rent instead of the total value of your home, here’s what you need to know.
Homeowners generally do not need to seek approval to enter a rent-to-own agreement with a buyer, but nevertheless, a legally binding contract is an important piece of the process. The contract protects sellers and buyers in the vent that the plan goes awry. In certain cases, it even provides homeowners with a way to back out of the deal.
There are two popular types of rent-to own agreements:1
Rent-to-own contracts generally include the following items:2
The contract should also discuss how the purchase price was determined. Generally, they’ll feature an array of other clauses that could allow the seller to back out of the deal if the buyer fails to meet them.
The short answer to the question, “can a seller back out of a rent-to-own agreement” is yes. That said, they are generally restricted from doing so unless the buyer breaks any of the clauses in the rental agreement.
Contract conditions and clauses can vary from case to case. Rent-to-own agreements can be quite strict and are usually to the seller's benefit. In fact, rent-to-own contracts may be cancelled if a buyer fails to meet any of the obligations stated therein.1
Sellers may be able to back out of a rent-to-own agreement if buyers break any of the following common clauses:
Your home is an investment and can be a ready source of cash if you can access your equity. But sometimes, cashing out your home’s value isn’t as simple as it sounds, which is why you should consider other arrangements, such as a rent back agreement.
That’s where Truehold comes in. With our Sale-Leaseback, you can sell your house to Truehold, continue living at home as a renter, and unlock your equity to use as down payment on a new home, pay off old debt, or achieve your other financial goals.
Are you looking for a way to access your equity without giving up the house you love? Get in touch with us today to get started on your residential leaseback agreement.
1. Contract Counsel. Rent-To-Own Contract: How They Work, What To Know. https://www.contractscounsel.com/t/us/rent-to-own-contract
2. Investopedia. Rent-to-Own Homes: How the Process Works. https://www.investopedia.com/updates/rent-to-own-homes/
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