Should I or Shouldn’t I?
WHAT IS A LEASE-OPTION?
A lease with option to purchase is a real estate sales and finance method. It is a
lease for a fixed term, such as 12 or 24 months, often longer, with an option for the
tenant to buy the home (or other real estate) at an agreed option price.
The lease-option owner-seller is obligated to sell at the option price, but the tenant-
buyer is not obligated to buy. However, when a lease-purchase is used, the buyer is
obligated to purchase at the end of the rental period.
A unique lease-option and lease-purchase feature is the rent credit. A portion is
credited toward the purchase price if the buyer decides to exercise the purchase
For example, on my lease-options the house rents for $1,500 per month with a 33
percent, $500 monthly rent credit when the option is exercised. If the tenant elects
not to purchase, the rent credit is lost. Needless to say, the rent credit loss is a
very strong incentive for the tenant to buy.
The primary benefit for the seller is obtaining a responsible tenant with a vested
interest in taking good care of the property and who is likely to buy it. The
nonrefundable option money received by the seller is usually far more than a
renter's security deposit.
THE BIGGEST LEASE- OPTION OBSTACLE.
Real estate agents rarely handle lease-options. The reason is they receive only a
small leasing commission up-front (from part of the option money) and the balance
of the commission when the tenant exercises the purchase option.
Since most realty agents don't want to wait a year or two for their
sales commissions, they often try to discourage lease-options. I bought my
home on a lease-option and the Realtor, the top-producing agent in our
town, said she viewed lease-options like money in the bank because most
properly structured options are exercised by the buyers.
THERE ARE ALWAYS MORE LEASE-OPTION BUYERS THAN SELLERS.
Few lease-options are advertised. Most realty agents don't encourage lease-options
because only part of the commission is paid up-front, with the balance paid when