It's very risky for the occupant to go into rent-to-own," said Donald Haurin, an economics professor at Ohio State University in Columbus. "All you have to do is violate some part of the contract — a late payment or some kind of maintenance obligation — and the owner can say the contract is violated. If there's some money that's been set aside for future equity, that can be lost."
"A number of sellers, particularly developers, are turning to that," said John McIlwain, senior fellow for housing at the Urban Land Institute. "It's definitely growing."
The buyer can evaluate a neighborhood and property without making a 30-year commitment.
Families can immediately enroll children in a desirable school district.
The buyer can move right in despite credit problems, inability to document income or lack of financing.
The seller gets a tenant with a vested interest in keeping up the property.
The seller receives rental income to cover the mortgage, helpful in a slow real-estate market.
The seller taps a broader market of potential buyers, instead of being limited to those with excellent credit and cash for a down payment.
If a sale goes through, the seller may save on real-estate agent commissions.