The rent-to-own (often called lease-to-own) industry has historically been associated with being predatory. This article will help you figure out the difference between a legitimate rent-to-own home program and a scam. 

How to tell if a rent-to-own program is legitimate

It should be clear who owns the home

The most predatory arrangements are the contract-for-deed scams, where the person who moves into the home believes they’ve purchased it outright and are not aware that the seller retains the deed (and therefore remains the legal owner of the property). Before entering into a rent-to-own agreement, make sure you understand who will own the home and what is required for a change of ownership. At Divvy, we own the home during your lease, but you’re able to purchase it from Divvy at any time (with advanced notice) during your lease period. 

It should be clear what actions the renter must take to eventually own the home

Some agreements state the renter must pay a certain amount over a specific period of time to get ownership of the home. The renter may also be required to avoid any major damage to the property. As long as these terms are made clear in the contract and are understood by the renter, this is generally an acceptable practice. With Divvy, we ensure all customers know what steps to take to buy back their home.

It should have transparent terms, including fees

The contract signed by the renter should clearly explain any fees or other payments that will be required before moving in and/or taking ownership of the home – there should be no hidden or undisclosed fees and no ambiguity in the contract. Before entering into any agreements, we recommend reviewing them and making sure you understand the terms. With Divvy, you’ll always know how the home buyback price is set and how much initial contributions and monthly payments will be.

Maintenance costs should be paid by the owner

The renter should not pay for major maintenance or repairs until they become the full owner of the property. At Divvy, we cover the cost of any maintenance or repairs required to make the home safe and livable.  

Monthly payments should be clearly broken out as rent or savings

It should be clear what portion of the monthly payment is going toward rent vs. savings. With Divvy, you can keep track of your home savings in real-time through your portal. 

Appreciation of the home’s value should be factored in

If the renter is making recurring payments that go toward the future purchase of the home, the contract should explicitly state who benefits from any appreciation in the home’s value while the renter occupies the home. With Divvy, we give you the option to buy your home from us at a preset price in the future, whenever you’re ready. If the home’s value rises higher than that, your preset price stays the same—meaning you could buy your home for less than its market price.

How to spot a rent-to-own scam

The rent-to-own industry has had a predatory past with scammy characteristics that can still be found today. While Divvy and other companies offer a transparent and trustworthy path to homeownership through rent-to-own, there are still scams out there aimed at luring renters into a trap. Keep an eye out for the following signs to determine if a rent-to-own program is a scam:

• The seller doesn’t actually own the property or pay property taxes: Search for the property owner online or ask for a tax bill
• The house is unsafe and in poor condition: Look for photos or signs of mold, lead, asbestos, etc.
• Unclear or inflated pricing: Make sure the home purchase price and monthly payments are transparent and clearly detailed
• Sight-unseen buying: Being asked to close on a home without seeing the physical property
• Unprofessional website and communication methods: Lack of listing photos and MLS data, unsecure handling of personal information, etc.

When considering rent-to-own, it’s helpful to know how it works with legitimate companies to avoid people trying to scam you. Additionally, we always recommend consulting with a trustworthy real estate agent or licensed attorney when doing so. 

How is Divvy different from rent-to-own scams? 

Divvy is a new approach to rent-to-own

We started Divvy to make homeownership, and all the power that comes with it, accessible to everyone. Since we were founded in 2017, over 500 of our customers have become homeowners, with approximately half of our customers who finish their lease with Divvy being able to buy their home and become homeowners¹. Read reviews from some of the many happy Divvy customers.

We also take pride in the flexibility and transparency of our program. Whenever you’re ready, you can buy your home at a preset price (with advanced notice). Or if life changes, walk away (with a 60-day notice²) with no obligation to purchase the home. We offer transparent pricing with easy lease extensions for eligible customers, too. 

Should you rent-to-own?

If you’re unable to qualify for a traditional mortgage due to a low credit score, minimal down payment savings, or inconsistent monthly income, rent-to-own may be a great option for you to become a homeowner. If you’re financially ready but want to benefit from a more competitive offer or try out the home or neighborhood before you buy, it’s also worth considering rent-to-own to help get you into your dream home.

Keep all these legitimacy factors in mind as you weigh your options so that you can safely and confidently take the next step toward homeownership. Interested in working with Divvy to rent-to-own your dream home? Get started today!

¹ The percentage of customers who have bought their home from Divvy is calculated by dividing the total number of customers who have bought back their home divided by the total number of leases ended during that same time period.

² In some cases and scenarios, this could be less than 60 days.