With the tightening grip of lending institutions and stricter requirements to get a loan, many home buyers are turning to alternatives. One of these alternatives is a Lease with Option to purchase.
I’ve seen many different ways sellers structure their Lease Options, some say put something in writing and we’ll go from there, others want a very large, non-refundable option price, and a rather high monthly payment, and some want you to enroll in credit repair programs to ensure you’ll be able to excersize your option during the period.
What is a Lease Option? A lease option is an interest in Real Property that gives you the right to purchase the property at a pre-determined & pre-negotiated price anytime within a negotiated period of time. The option typically costs money to purchase and is usually preferred second to a conventional method of finiancing (loan). Options can be protected by recordation at the courthouse for a minimal fee.
Options can be setup as Purchase and Sale agreements with early posession / delayed closing, or elaborate documents prepared by competant attorneys. Either way there is a lot to consider.
Most options have:
1) Option Price – can be several thousand or tens of thousands, depending on the terms the seller is willing to accept.
2) Monthly payment
A lease option is still a lease, so you are still a tenant while you are in the home so don’t be surprised if the seller does not want you to make improvements or do anything that a typical landlord wouldn’t let you do. I suggest having the option managed by an escrow company (from a buyers perspective) to ensure that the seller is paying the mortgage, taxes and other items required by the property owner (property taxes can be negotiated either way in an option).
If you are tight on credit or are considering a Lease Option – I’d be glad to assist and help in any way possible. Please give me a shout.