Why Don’t Realtors Like Rent to Own?

October 11, 2017 by Marty Orefice | Realtors, Rent to Own

Real estate agent hands clients the keys to a home.
Check the chatrooms, ask your realtor friend, and you’ll find that most realtors do not like rent to own. And they’re not wrong to dislike it. The cards are stacked against rent to own and realtors. Realtors don’t have a lot of experience with rent to own. They don’t make a lot of money from it and there are many examples of rent to own deals gone wrong. They are justified in disliking rent to own, but that doesn’t mean they’re right not to.

Not Every Deal Is Perfect

Realtors have a right to be cynical about rent to own. It’s not for everyone. And some people dive in long before they’re ready.

Rent to own predicates on the ability for the buyer to qualify for a mortgage by the end of the lease term. We all tend to be optimistic about how well we will be doing two years down the line. Therefore, some people enter a rent to own deal expecting to get promoted or save in a way they never have before.

People should enter rent to own deals based off of the advice of a mortgage broker, not their expectations. A mortgage broker will give you a realistic perspective of when you will qualify for a mortgage. A broker can also help you figure out what steps you should take to get there.

When a buyer does not close, they lose all the money they’ve saved in escrow through the rent to own deal (i.e. the option fee, premium payments, etc.). That is a pretty crummy situation to be in.

Additionally, if your contract isn’t good or you don’t do your research on the property and its seller, you could fall into a rent to own scam.

Negative experiences involve more thinking and processing than positive ones do. Therefore, people are more likely to discuss them and with stronger words than positive ones, said Stanford University Communications Professor Clifford Nass, in a New York Times article. Naturally, clients with negative experiences want to talk to their realtors about them. Those who have successful experiences don’t really have a reason to contact their realtor about them.

Realtors Don’t Have A Lot of Experience with Rent to Own

Realtors don’t typically work with rent to own deals because there isn’t a lot of commission for them in the field. Since they don’t do rent to own work often, they must rely on word of mouth for information. Circling back to Professor Norris’ information, word of mouth is more likely to be negative.

Realtors Don’t Get A Lot of Commission From Rent to Own

Realtors aren’t mortgage brokers. They cannot guarantee you will qualify for a mortgage by the end of your rent to own deal.

Realtors put the same amount of effort into finding you a home that they would for a normal sale. However, they wouldn’t see any of the profit from the rent to own deal until it closes. Closing could be several years or months down the line for a rent to own deal. Whereas, closing on a regular home sale takes 1-2 months.

A realtor could technically take a commission off of an option fee. Although, the seller would need to be willing to absorb the cost of the commission. The seller must return the full option fee to you when you purchase the home.

For all that and more, realtors don’t have a lot of experience with rent to own. Therefore, they do not have much to counter the negative claims of people whom rent to own didn’t work well for.

Additionally, a realtor has every interest in convincing you to buy a house now, even if you’re not ready for it. Whether you foreclose or not, realtors make their commission. That isn’t to say the realtor wants you to fail or even believes you will fail, but we’re all motivated by our self-interest.
Buying a Property in the Philippines by myProperty.ph by Nerissa dela Cruz is licensed under CC BY 2.0.

Marty Orefice

About The Author

Marty Orefice

Martin Orefice is a real estate investor who has been in the industry for over a decade. He has experience with rent to own deals from all sides—as a buyer, seller and investor. He created RentToOwnLabs.com to provide the #1 resource where people can find information about all things rent to own.

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