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Regulator: Look before leaping into rent-to-own

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Guest | 09 Sep 2013, 05:18 PM Agree 0

“If a deal seems too good to be true, it probably is,” says the regulator's registrar Joseph Richer. “As with any real estate transaction, it’s crucial for consumers to do their research before entering into a contract.”
The warning comes on the heels of media reports this summer that homebuyers have lost money and even been evicted from their homes. Incidents of investors, or homeowners looking to sell, have also made headlines across the country this year.
“Asking questions beforehand can help to prevent these unfortunate scenarios, and a registered real estate professional can help,” Richer adds. “RECO recommends that consumers conduct an online search of the company and the individuals in charge, ask for references, and see if they have a history with the Better Business Bureau."
The registrar is also recommending parties to these growing number of deals seek independent legal advice before signing a contract so they're up to speed on any and all possible outcomes.
Hiring a registered real estate broker or salesperson could also be part of that action plan, he says.
"A broker or salesperson has a duty to look out for their clients’ interests as they help them navigate the buying process," according to RECO. "In addition, they must adhere to regulations and a code of ethics, and they are accountable if something goes wrong."
  • Sukhjeet Singh | 10 Sep 2013, 09:43 PM Agree 0
    Educating investors and clients on the process and contracts is key to making sure the transaction is a "win-win" scenario for both parties. We actually require ILA signoffs in our contracts to make sure both parties understand what is involved. With some of the "horror" stories associated with Rent-to-Own, transparency is key.

    As mortgages get more difficult to obtain due to lender guidelines, the trend towards R2O will increase and you need to make sure you are dealing with a reputable company with a good history. Being in Montreal where the R2O process is not as known as the rest of Canada, I would recommend dealing with agents or brokers who have actually helped clients with the R2O process. There are many who have only heard of it and don’t know the details.
  • Francis Dryden | 10 Sep 2013, 09:45 PM Agree 0
    Anybody looking at "rent-to-own" should know the following.

    According to CMHC rules... the only amount of rent that can be applied to a purchase is the amount OVER the market rental value of the property.

    Then, if it is not just some shyster... the amount accumulated may be applied as down payment... keeping in mind that if mortgages that are not conventional... they MUST be insured... so this buyer that would enter into a scheme like this would not only require good credit BUT would take an awful long time to "save" the down payment by using only the money over market rent value.

    Generally people looking for these kind of deals are high ratio buyers and of course have little or no down payment so would have to qualify with CMHC or a private insurance provider for the mortgage.

    Anything else will not work... and I don't think there is anything else except a bunch of shysters... and as the saying goes, "Caveat emptor"... "buyer" beware... the deal stinks!

    Thinking of an average house in Canada of around $350,000 requiring a minimum of 5% down, at least $16,000 would be the requirement. If one could pay say $500 over market value rent it would take almost 3 years to come up with that money plus one would need closing costs (another $3,000+) and the shyster would then set the price of the house... what do you bet you'd be short again?
  • Claude Pilon | 12 Sep 2013, 06:29 PM Agree 0
    I fully agree EDUCATION is where it is at when it comes to RTO or ANY investment strategy for the matter. One must always due there own due-diligence and know who they are dealing with. Check out a couple of our last blogs on this at:

    We also have lots of testimonials and great information on our web site.
  • Cal-mac Rent 2 Own | 13 Sep 2013, 07:33 PM Agree 0
    I totally agree that buyers need to be aware, but there are reputable companies out there whose sole purpose is to create a win/win situation and help those buyers. As a founding member of CAROP (Canadian Association of Rent to Own Professionals) I urge both rent to own providers and rent to own prospective buyers to check out our website

    Where there is an opportunity for money to be made you will always find unscrupulous operators, no matter what industry but the key to success is doing your homework!!
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