Leasing with the Option to Buy
I get a lot of questions about renting to own or leasing with the option to buy. Here it is explained in a nutshell.
Leasing with an option to buy is when a renting tenant signs an agreement with a landlord stating that the tenant can buy the property at the end of a prearranged time period. The owner is obligated to sell at the option price, but the tenant is not obligated to buy. The tenant can buy the property only if the landlord exercises the option.
The lease agreement should have a clause that terminates the option to buy if the tenant in any way violates the lease or gets evicted before closing the agreement to purchase.
Usually, purchase price is set out in the original lease-option agreement – in other words, the purchase price is set according to today’s market, not in the future when the option may be exercised.
An option to buy doesn’t give the tenant legal title to the real estate. The tenant becomes a purchaser only upon exercise of the option, at which time the landlord-tenant relationship ceases and the option becomes an absolute and binding contract of sale.
A unique feature of the lease-option is the rent credit. The tenant usually pays above-market rent for the property, but a (nonrefundable) portion is credited toward the purchase price if the buyer decides to exercise the purchase option.
This option can be great for future buyers that are working on their credit, down payment for a home or just not sure if they want to commit to buying a home down the road. It is always great to have options if you are stuck in limbo between renting and buying a home. Give me a call today to discuss your possible options to purchase a home 775-527-2015!