Use a Lease Purchase Agreement When You Have a Real Home Buyer

Since there are still a lot of people that need to sell their house and a lot of good buyers that just can't quite make the grade for a new mortgage right now, many sellers are starting to consider (or flat out offering) to let them rent the property until they can close. This is called a Lease Purchase Agreement. If the purchaser really wants to buy the property and is working hard toward that loan, and the seller is ready to move the property, it can work out great for both parties.

A lease purchase is most often used when you have a real buyer and not just a renter that may or may not want to purchase the home in the future. The buyer is making an agreement to purchase the property. Most sellers want the buyer to make a reasonable non-refundable purchase deposit to show that they are serious about buying the house. They don't want to be a landlord for an extended period of time but they do understand the real estate market can be slow at times and is often crowded with lots of other houses potential purchasers can consider.

So if they have a potential purchaser that has a nice "down payment" and looks like they will be able to get a mortgage in the near future, they are ready to make a deal. Many of them also know that since they are allowing the buyer to move in under a lease purchase agreement, they can demand a purchase price and monthly lease amount on the upper end of the value scale.

Here is the web-address of a site where you can get the forms: http://www.leasepurchaseagreementmadeeasy.com

Lease Options are a little different as they do not require the tenant to purchase the property. It is still a form of contractual agreement between a possible buyer and a seller but the tenant does not have to buy the home before the end of the rental term. The tenant usually pays the seller for the option, which gives them the exclusive right to purchase the property during the term of the lease. No one else can buy the property out from under them and if the buyer does decide that they want to purchase the property within the term of the agreement, the property owner must sell. So it is basically a one way agreement.

Lease options are commonly offered by landlords that really do not care, whether or not, the tenant purchases property. In many cases, they actually hope that the tenant does not exercise the option, so they can keep the home in their portfolio of properties.

While not always required, option money is often paid when the agreement is made. It is not usually as much as a seller would require with a lease purchase. It normally counts toward the purchase price of the property, if the tenant decides that they do want to buy the house. Similarly, a portion of the rent may also be contributed towards the purchase price. The option money that is paid is typically not refundable.

The purchase price for the property may be decided at the time the agreement is made. However, a lease option can also involve an agreement to buy at whatever the market value of the property will be if and when it is bought. It is more common for the purchase price to be set at the time the lease option agreement is made.

During the term of the lease option, the buyer will be living in the property and paying rent to the property owner. The lease option contract will specify the term of the lease and the amount of rent that needs to be paid.

Most lease options will have a term of between one and three years, although this can vary. The lease option agreement will specify not only the term of the lease, but also the terms under which the property can be purchased. If the lease holder has not exercised their right to buy the property by the end of the lease term, then the option to purchase expires. They may continue to rent the property, if the property owner agrees, but at this point the property can be sold or leased to someone else.

To be clear a lease option is not a binding agreement to purchase a property, but a true lease purchase does require the buyer to purchase the property before the end of the lease period. Both are legal contracts and it is important for both the property owner and the tenant/buyer to understand them completely before they sign the agreement, in order to ensure that their interests are protected properly. You should always consult a competent real estate attorney if you have any questions about the forms you are signing.