"lease to own" agreements?

Question

I want to know of the different types of lease to own agreements.

It seems the typical situation is to pay rent plus extra which goes towards the purchase price - what is the advantage to the renter here?

Is there ever an agreement whereby the renter pays a large down payment (25-50 percent) and then the monthly rent gets subtracted from the agreed upon purchase price?

Answer 1

Quite frankly if someone has at least 25% to put down on a house, they can qualify for a loan pretty much no matter how bad their credit is. I once did just that on child support alone!

Lease options are usually expensive for the buyer and often pretty risky. Terms can be written so that there are few rights. I've heard of contracts where the tenant loses the option rights and any balance accrued towards purchase, for being 5 days late on one rent payment! Plus the house is usually priced above market value.

Most honest owners would rather either be a landlord, or sell the house outright. There is little incentive to offer a lease option unless their is some significant benefit to the seller, such as getting more than the house is worth (pretty common here because a lot of people want out of houses they haven't owned long, and that they financed near 100% so there's no equity), or they write a contract that is likely to default, leaving them with a pot of cash.

I've seen plenty of such offers where the option cash, expected upfront, is as high as a qualifying down payment.

What you propose doesn't make a ton of sense, and again if you had that much cash, you could get a fair deal on a house AND a real loan.

Answer 2

There are too many types of Lease/purchase agreements out there.Usually they do what you said. They are for people who want to purchase a property but don't have enough "down" money. So, the owner lets them accrue it over time, with a balloon payment for the purchase price after an agreed period of time. That's when you go for the mortgage to pay them off. I would suggest that you seek council in the sate you live in before you agree to anything, I have seen some nice people lose a lot. Good Luck, Hope it works for you.