Geoff Whelan, Buyers Broker Whelan, Dublin2
Rent 2 Buy schemes are common abroad. It’s a product that allows potential property buyers to rent a property with a view to purchasing it. The vendor allows a portion of the rent as a credit against the purchase, which effectively helps to tenant to build up a deposit and saves ‘dead money’. This would have been helpful particularly to 1st time buyers throughout the boom years but is only becoming popular now, as developers struggle with sales.
www.rent2buy.ie is an outsourced company used by sellers and is based on the mature US model, while other schemes are run either by the developer or estate agents acting on their behalf. And therein lies a pitfall, potential purchasers in a transaction often forget that estate agents are working on behalf of the seller. So, despite the good relationship you build with them they are still representing the sellers interests. This is a fault with some Rent2Buy schemes and seems to be overlooked. As the transaction is an option to buy in the future, the arrangement must be mutually beneficial.
Some things to look out for:
Some schemes are designed to give an 8% deposit, this presumes you will get a 92% mortgage at the end of rental period. Given current bank lending practices this is not likely. Also, in order to obtain a mortgage, the property must value up to the agreed price, many of the schemes running rent 2 buy, will give you a significant discount on the price if you are buying now. This is the actual price of the property and will be used by the banks for valuation purposes, so that you actually don’t have a credit worth anything. My fear is that many Rent 2 Buy customers may be disappointed to find that they cannot actually buy the home they have been treating as theirs for 2-3 years. Buyer Beware.