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Lease Options Explained

In the real estate industry, some people have posed the question regarding the opportunity to purchase a property with no money down.  Even some real estate gurus have made the claim that “anyone” can buy a house without using their own money.  Bold claims!

One method that is often stated is the lease option.  We will try to explain lease options in “plain language” so that it can be easily understood.  At least the basics that is, as lease options can be somewhat complicated.

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If you need help in understanding the lease option, then contact us today!  We can’t wait to hear from you.

In this post we briefly touched a few nuances with lease options.  Well, we will address more issues/opportunities in the next couple of blog postings.  Stay tuned to find out more!

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A lease option is an agreement between a buyer and seller that gives the buyer the option to buy a house at the end of the agreement.  The seller must sell the property if the buyer decides to “exercise the option” to buy it.  The seller also agrees that they will not sell the property to anyone else before the option expires.

The buyer is the lessee (the person who leases the home) and the eventual, possible, homeowner.  At the end of the lease term, the lessee has the option to purchase the home….or not, if the situation isn’t optimal.  This method of buying homes has become more popular as the real estate market has slowed to a crawl.  It is also popular for people who may not have the 20% down payment required by many banks and/or people with “bad credit” (as determined by the banking industry).

A lease option (is different than a lease purchase, a lease purchase binds both parties to the sale, where in a lease option the buyer has the option but the seller doesn't) is the abbreviated form of the appropriate term “Lease With the Option to Purchase”.  It is a type of contract used in both residential and commercial real estate.  However, we are going to stick with residential deals as commercial deals can become quite complex.

Lease options offer opportunities in up and down markets.  There are benefits for both buyers and sellers: The buyer gets a house at a pre-determined price.  The seller gets more income from the buyer and a better quality tenant who is usually committed to taking good care of the property.