What You Need to Know About Rent-to-Own in Illinois

 Posted on May 21, 2025 in Residential Real Estate

Like many people in today’s economy, you may be interested in buying a home but are unable to save enough money to make a down payment. You may also have a credit score that is not high enough to qualify for a traditional mortgage, or your income may be insufficient. If you are facing one or more of these issues, you may wonder whether a rent-to-own home could be a good option.

Rent-to-own allows you to become a homeowner when you might not otherwise qualify. However, there can be a downside to rent-to-own situations, and it is always a good idea to know exactly what you are getting into before you sign the paperwork. If you are considering a rent-to-own home, speaking to an experienced Northwoods, WI real estate attorney who can help you make the best decision can be beneficial.

How Does Rent-to-Own Work?

If you choose a rent-to-own home, you will have a specific time period to rent the home before you have to decide whether you want to exercise your option to buy the home. Some agreements for rent-to-own homes require a fee that is called an option fee and is usually 2-7 percent of the agreed-upon price of the home. Paying the option fee allows you to lock in your option to purchase.    

This fee will be deducted from the agreed-upon purchase price if you exercise your option to buy the home.  For example, if the home has an asking price of $300,000, and you pay 3 percent of that as an option fee ($9,000), then if you agree to buy the home at the end of the five-year agreed-upon period of time, that $9,000 will be deducted from the $300,000 purchase price.  

Many agreements of this type will place a portion of your monthly rent into an escrow account to be used at the time of the sale to help cover the down payment. If your monthly rental payment is $1,800, the owner might agree to place $200 per month in an escrow account, which would give you $12,000 that would go toward your down payment at the time of purchase.

Are There Risks Involved in a Rent-to-Own Situation?

There are certain risks in rent-to-own home ownership. The primary risk is that you could decide the house you are renting is not right for you. If you choose not to buy the home, you could lose the option fee money as well as the money in the escrow account. There is also the risk that the value of the home could significantly decline during your rental period, leaving you to pay more for the home than its current value.  

What Are the Two Types of Rent-to-Own Agreements?

The owner of the home will ask you to either sign a lease-option or a lease-purchase agreement. Under both options, you can lease/rent the home for a specified time, typically between one and three years. If your agreement is a lease-option, you will pay the option fee and more each month to be placed in an escrow account. A sales price will be agreed on, and at the end of the stated time, you can buy the home, but you are not legally obligated to do so.

Under a lease-purchase agreement, you must buy the home, and the seller must sell the home. Everything else works much the same as a lease-option, but you cannot walk away from buying the house, and the seller cannot decide to sell to someone else if real estate has skyrocketed. If you decide not to buy the home when the lease ends, you could be sued for breach of contract.

Contact a DuPage County, IL Real Estate Lawyer

A Naperville, IL real estate attorney from The McCormick Law Firm, LLC can help ensure a rent-to-own agreement is beneficial for you, there are minimal risks, and no hidden costs. Attorney McCormick is licensed to practice real estate law in Wisconsin and can work with Illinois residents who want to purchase property or have other legal concerns. We give discounts to military, veterans, and first responders. Call 630-517-8570 to schedule your free consultation.