The Real Estate Browser Volume 8, Issue 14 | Page 10
10 — Say you saw it in The Real Estate Browser of Lynchburg — Volume 8 Number 14
www.LynchburgRealEstateBrowser.com
Keeping Your Options Open
by Dan Vollmer, Associate Broker, ReMax 1st Olympic
Awhile back I had a con-
versation with a business col-
league, who asked me about the
rise of homes offering ‘Lease
Purchase’ options. He said “I’m seeing this more
and more - why is that… and how does that even
work?” it. The tenant has an OPTION to buy first. If they
Which is a great question (okay, technically its
TWO great questions). First off, why are more and
more home owners/sellers offering this option? I
believe there are a couple of factors: a purchase agreement detailing the sales price and
Some people bought a new house, moved into
it and listed their previous home for sale. Most
people can’t swing two mortgage payments for very
long, so they opted to rent the old house when it
didn’t sell. Now they find themselves in this never-
ending spiral - they want to sell, but have to keep
renters in it if it doesn’t. How do you turn into that
skid? You offer the lease purchase option to your
tenants or to prospective buyers. and pays the seller rent money. So the property is
Other sellers may just want to cast as wide a net
as possible, and offering a buyer the lease purchase
option allows those buyers who don’t qualify for
a mortgage now - but hopefully will in the near
future - the ability to buy the house they want, just
with a deferred closing date. property. In other words, if a property would typi-
choose not to exercise that option, then the seller is
free to market the property for sale to the general
public.
Lease PURCHASE: here, the buyer and seller
come to terms on the sale of the property, they sign
various other details. The difference here is that the
closing date is set for a year, sometimes longer, in
the future. And in the interim, the buyer moves in
being used as a rental, but occupied by the eventual
buyer - who is under contract.
A logical follow up question under the lease
purchase agreement is this: does the rent paid
go towards the purchase price? In some cases, it
may - if the monthly amount paid by the buyer is
over and above the market rental rate for a similar
cally rent for $750, but the buyer is paying $1000/
month, that extra $250 can be applied towards the
eventual purchase.
Of course, there are many other variable and
Now, how does a Lease Purchase work?
Technically, there are two different options, and
there are distinct differences. details to agreements such as these - and they can
Lease OPTION: under this scenario the prop-
erty is basically rented out to a tenant. The owner
maintains ownership, the tenant pays rent, and its
very much a rental property. The key here is that if
the owner ever decides they want to sell, they have
agreed up front to give the tenant the first shot at to sell a property. For some, however, being willing
be quite complex. Which is one reason most sellers
find them to be less than ideal options when trying
to consider these scenarios may be what attracts
the perfect buyer for that home.
Questions, comments, or have an idea for a future
article? Email me at [email protected].