What Is A Lease Option?
It sometimes happens that a buyer does not want to purchase, or cannot purchase, immediately, and a seller does not want to sell, or cannot sell, immediately. In this situation, both parties may want a lease option arrangement.
In general terms, a lease option is an arrangement where a prospective buyer moves into a property as a tenant. The buyer has the right to buy the property for a specific price during the option period. The monthly rent is equal to the fair market rental rate plus an additional sum. The additional sum is credited to the buyer at closing, should the buyer exercise the option to purchase. If the buyer does not buy the property, then the additional monthly payments are retained by the owner.
Lease option properties can be located by real estate brokers. Lease options contracts should be reviewed by attorneys for each party to the transaction before signing. (If in a rent-control area, ask how such policies may impact a lease purchase agreement.)
Before entering into a lease option arrangement, speak with lenders to review current financing requirements. Given loans with little down, it may be possible — and better — to buy outright rather than use a lease-option.
Ask what happens if the buyer does not want to purchase. In this case, the owner has obtained a premium rental while the tenant has paid something above the fair-market rental rate.
© Copyright 