Lease option?

Question

How does a lease option work and what does the seller supposed to do?

Answer 1

A lease option is basically a contract to purchase a home/land after a determined amount of time and equity placed in the home/land. The contract should state all the requested terms. For example, one house, valued at $150,000, selling for the same as the value, renter agrees to buy house after 3 years, in addition to pay rent, the pay additional money towards the down payment on the house. Rent payment is $900, with $400 going towards down payment and $500 towards monthly rent that goes into your pocket. At the expiration of the term the buyer would have roughly 10% of the purchase price as their down payment.

The seller is supposed to have the contract drawn up. You can get these by searching the web or by contacting an attorney or title/escrow company. Make sure you get the contract recorded by your deed registrar. It helps protect you in the event that the buyer defaults or of you change your mind on the contract.

You can find out more about them at the sites that I listed below! They are a great alternative because not only does the seller get rid of the house after the term is up, but they can get a regular rent payment to go towards the mortgage!

Answer 2

A portion of your rent monthly must go to your down payment and spelled out in the lease. After 1 or 2 years max you should be able to treat this as a purchase and have little or no cash to the table. Also it should spell out the actual purchase price in the lease as well as market values can go up. If not you could get screwed on the new sales price a year or 2 out.
The bad part of this is what happens if they don't pay the mortgage and get foreclosed on or get sued and a judgment rendered in the same time frame? you could still loose.
These can be risky but most of the time they are not.
ALWAYS pay by check as you will then have a paper trail as to timely payments when you do purchase. NEVER PAY CASH OR MONEY ORDERS IN THUS TRANSACTION! you can always order old copies of checks from the bank.
Good luck
I am a mortgage banker in TN & KY