Topic: How does a lease/option to buy work? (Read 329 times)

JustGina · « **on:** August 04, 2009, 09:09:21 pm »

We looked at a great house tonight....lease with option to buy. Can someone explain how these work? Do I need an attorney?

KristieandJason · « **Reply #1 on:** August 04, 2009, 11:43:35 pm »

Disclaimer: This is just my opinion and it could be completely wrong!!

They are basically just a lease, but they give you the 'option' to buy at the end of the lease. Other terms can be negotiated, however, most of the time you don't truly hold title to the home (in a legal sense)....you just lease it until you can buy it outright.

JustGina · « **Reply #2 on:** August 05, 2009, 07:51:23 am »

Do we agree on a purchase price at the beginning of the lease? Or does the purchase price not come into play until we are ready to buy it?

Cowboy1 · « **Reply #3 on:** August 05, 2009, 08:58:36 am »

The purchase price should be agreed upon up front if it structured as a lease with an option to buy. I have looked at a lot of these and they can be structured a thousand different ways. Your deposit can be credited for your down payment, part of your payments can actually work towards principal, etc. In these agreements, you have to be sure that the current owner is financially strong. If for some reason he defaults on the current loan, you lose whatever investment you have made.

If the current owner owns the property outright, you could talk about structuring it as an owner financed purchase. In this case, it works like a normal purchase and he/she would be the lienholder. Good luck.

kingwillie · « **Reply #4 on:** August 05, 2009, 09:30:38 am »

When I do a lease / purchase with someone, we devote 50% of the deposit to the total down agreed to. We devote 20% of the rental payment to the down agreed to.

The price of the house is agreed to on the front. If owner financing comes into play because traditional financing can't be used, we agree on the front the total down need to go from lease agreement to a purchase agreement.

And yes, your homeowner had better be sound. That is tough to challenge & prove either way. Gut feel & luck plays a huge part, or bad luck. Make the lease agreement & hope for a solid purchase, but go into it knowing it is a lease first & foremost until you make the switch.

You can ask for & be certain an escrow account is set up separately for the % agreed to for the future down development. If they just tell you, even if they just write, if there aren't account statements you can view at any time, where is that money really going to come from when it comes time to move to traditional financing & actually buy the home.

It is like a buy here pay here car deal. It is subject to repo & the leaser / seller makes good money doing this with the same house over & over.

My two cents. My goal is to be The Donald of Forney.

squintsq · « **Reply #5 on:** August 05, 2009, 09:40:13 am »

The Donald Duck of Forney???

He does have a cool voice I suppose.

I know, I know, you're talking about Trump, but couldn't help myself.

Twenty Peaceful Minutes

Author Topic: How does a lease/option to buy work? (Read 329 times)

JustGina

How does a lease/option to buy work?

KristieandJason

Re: How does a lease/option to buy work?

JustGina

Re: How does a lease/option to buy work?

Cowboy1

Re: How does a lease/option to buy work?

kingwillie

Re: How does a lease/option to buy work?

squintsq

Re: How does a lease/option to buy work?