The Lease with Option to Purchase When To Use It

By: Gloria Smith

Not all homeowners who sell their residential property are always successful in disposing of their homes. Some may be lucky to sell their homes in just a very short period while the properties of others stay for quite some time on the market.

But those who can’t sell their homes right away should take heart as there’s an ideal alternative for them and that is to lease with an option to purchase. Offering this type of option has been proven an effective method of attracting buyers in a slow market. There are actually other advantages.

With this option, home sellers are relieved from paying a mortgage or real property taxes on a vacant property. They still earn from the monthly rental fees and get top dollar if the renter later decides to buy the property. This ensures that a home seller will not only have a tenant but a potential buyer who will most likely pay on time. Also, the homeowner is assured that the renter and eventual buyer will take care of the property as if it is already theirs.

This can be a good option for buyers with tarnished credit score as they can have time to fix it during the lease period. Also, in this situation, buyers are not forced to commit to buying the house after the lease period expires and can just leave if they feel the home is not right for them.

However, for buyers bent on keeping the house for good in the future, this may be the right solution. At least during the lease option period, no other individual can purchase the property.

A fixed purchase price may be negotiated by the seller and the buyer within or a little higher than the property’s market value while a predetermined rental fee will also be set by the seller. A lease purchase agreement normally takes from a year to three years.

Additionally, sellers benefit from a premium on top of the monthly rent on their home and an option fee of a maximum of five percent. If the home is bought once the lease expires, these two fees will be credited to the buyer’s down payment. If not, the seller retains the money.

Another advantage of this method is that both the seller and the renter/buyer gain from this situation financially. While the owner earns from the monthly rent, the renter/buyer is also given the opportunity to own the home of his or her dreams without putting pressure on his pocket. In this way, a seller helps a tenant attain his dream of owning a home he or she could be proud of.

For homeowners who wish to try this strategy, it is highly recommended that they hire a real estate lawyer experienced on this matter to come up with a legal lease purchase agreement and explain the seller’s rights. It should be understood that risks are always involved in any real estate transaction hence, sellers must ensure that they verify the credit and rental payment history of any potential buyer choosing this lease purchase option.


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