Lease Option How To – Learn to Lease a House with the Option to Buy.
Posted on July 24, 2009 - Filed Under Business | Leave a Comment
A Lease Option is basically a written agreement between a property owner and a tenant that allows the tenant to use a property in exchange for rent, but it also gives the tenant the option to buy the property for a certain price within a specified time period. A non refundable option payment is usually collected by the seller to initiate the agreement.
A Lease with the option to buy is a great way to create a win-win solution for both the buyer and seller alike. The seller gets to sell their house quickly for top dollar and the buyer gets the option to own a house regardless of credit history or qualifying through a bank. Both parties benefit during the leasing period of the agreement. The seller gets a positive cash flow in the form of monthly rental payments and the buyer get time save money and/or prep for future financing while enjoying the house in the meantime.
Here are the basic steps in order to perform a Lease with the Option to Buy;
1. First, establish the value and selling price of the house you wish to sell (or buy if you are a buyer).
2. Then establish the amount of monthly rent (be sure it is enough to cover your original mortgage).
3. Decide how much you (as the seller) will accept as an option down payment. The buyer pays the seller this option money for the right to later buy the property. This option money is non refundable if they opt not to buy the house and I usually apply all of their down payment towards the purchase price of the home if they DO opt to buy. However, this doesn't always have to be the case. I usually ask between 5% - 10% of the selling price, however, you can ask more if you like. I go lower for a house of lesser value and higher for houses in nice neighborhoods of higher value.
4. Decide how long you want the lease the house before the option to buy expires. This time frame is typically between 2-3 years; however, you can go as long as you want.
5. Find a good Lease Option Agreement Form, review it, and modify it if necessary.
6. Then advertise for a buyer. The local newspaper is the easiest way.
7. Once you find a buyer, then both you (the seller) and the buyer will fill out all the required information in the Lease Option Forms and collect the Option Down Payment.
8. Then the new tenant is ready to move in and you are finished.
Buying a home with a lease option is one of the simplest ways to buy and sell real property. It may seem a little intimidating at first, but in the end, the benefits far supersede the challenges of getting started. The best tip I can give you is to always read the lease option contract/form/agreement that you choose to use. I know it sucks to read legal jargon, but it is by far the best way to understand what both parties are getting themselves into. Lease Option Forms are relatively easy to understand in comparison to other real estate contracts, so give it a shot!
One last thing, if the seller is in foreclosure, a lease option is a great way to get the foreclosure stopped quickly. The Option Down Payment money can be used to catch up on payments or reinstate the loan.
To get detailed instructions with lease option forms and documents to complete a lease option transaction, go to www.foreclosureroadway.com/page/1p6k3/Real_Estate_Documents/Lease_Option.html
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