Rent-To-Own Contract: what it is and Different Types What is a Rent-to-Own Contract? A rent-to-own contract, also known as a lease-to-own agreement or lease option, is similar to a standard lease agreement, except at the end, the tenant can purchase the home from the landlord. Usually, this is for a single-family home, and typically it is because of one of a few things: - the landlord can’t sell the rental property - the landlord has a new home and wants to get rid of the rental - the tenant needs some time to save money to buy the house A rent-to-own contract is a combination of a lease agreement and option to purchase agreement between the landlord and tenant where the tenant will pay a little more than fair market value for the property each month. The overpayment is intended to lie in escrow until the end of the contract, when the renter has the opportunity to buy the home outright or walk away. The terms of the payment is negotiated between and vary depending on the contract, so consult with an attorney before signing as this is considered a legal document. Types of Rent-to-Own Contracts Two main types of rent-to-own contracts can exist. One is a lease agreement with the option to purchase, and the other is a lease agreement with a purchase agreement. - A lease with the option to purchase agreement. The name identifies this contract as an option to buy the home at the end. The word "option" in this form of rent-to-own contract is differentiating factor. If the tenant does not want to purchase the home in the future, they are not legally bound by the contract. - A lease agreement with purchase agreement. Again, the name is the primary descriptor of this agreement option. This is a less flexible option of the two and requires or legally obligates the tenant to purchase the property after the lease portion is expired. What’s Included in a Rent-to-Own Contract?