Things always happen at the worst time, am I right? You’re one month out from listing your home and your furnace breaks down, GREAT! What do you do? Calling around to some local companies you learn that you don’t need to fork up the $4500.00 all at once to replace the furnace, you can RENT the furnace and pay a monthly fee. Well isn’t that ideal, you are planning on selling anyway, so you should only have a few months of this fee to pay and the rest is the new owners’ problem. Even better, the buyers will be ecstatic to learn that they have a brand-new furnace that they don’t need to worry about for the next few years! Win, win. Or so many sellers think.
Lately, I feel like I have been running into this situation more and more often. I am not sure if the equipment rental companies are just getting better at persuading unassuming clients to be part of their scheme or if we just need to do a better job of educating people about what this means for them when selling their home. Unfortunately, usually by the time we come into picture, the damage has already been done. So, what do we do now?
Let’s start off with what these rental companies aren’t telling you. Simply, you (or the next owner) will end up paying more than DOUBLE what the furnace would have originally cost once the rental contract is over. Ok yes, once again if you are selling who cares, so let me keep going. The average life span of a new high-efficient furnace is roughly 25 years… and these contracts only last usually 8-10 years. Now remember, this is a rental, so when the contract is up you no longer have a furnace. Therefore, you just paid double to use the same furnace for less than half of its lifespan. So to put it into perspective, if you buy the furnace it will cost you $4500.00 up front and you will have it for at least 20 years; if you rent it you will end up paying close to $10,000.00 all in and only have it for 8-10 years. The math is simple, and the buyers will see that too.
So here it is, for some buyers the extra cost for a rental is a huge expense on top of all the other costs of owning a house, especially for something that most homes already include. Add on to that, the fact that they are technically purchasing a house without a furnace (as it is an extra cost to have one). When comparing to other homes that don’t have this added cost, your home will start to appear less ideal. Unfortunately, what this means for you is that we will either need to adjust the price you are asking for the home to take into account these costs, OR you will have to buy out the contract, and trust me that doesn’t come cheap. Most buyers’ agents’, will advise their clients to not take on the rental and to ask for the contract to be bought out prior to possession. So that initial $4500 you tried to save by renting, BAM it just doubled.
Now of course I am over generalizing, all rental contracts are a little different and the price to buyout may change slightly, but they are all much more than the original cost to buy. Now here is the real problem, some people unfortunately think this is their only option. A lot of households don’t have the savings set aside for an emergency for these types of situations. BUT there are other programs that can help. Manitoba Hydro has many programs that can help homeowners with these upfront costs and upgrades while charging you very little interest. For more information on theses programs please visit:
I have focused mainly on furnaces in today’s blog since they carry the largest price tags, but in real estate we see all kinds of rental contracts. Some other common rentals we see are hot water tanks and air condition units. I have even experienced all three at one listing! That’s one big extra expense for a potential buyer!
The point I am trying to drill into you today is that whichever type of rental you are considering, please take a second to think and do the math. It may just save you a lot of money in the end, and always remember we are here to help!
Phone: (204) 781-1767