A lease-option is an agreement between a buyer and a seller that allows
the buyer to lock in the future purchase price, save money for a down
payment and buy the property in the future at current prices. It can be
a win-win situation.
Instructions
Difficulty: Moderately challenging
Things You'll Need
* Lease-option Agreement Forms
* Real Estate Attorneys
Steps
Step One
Agree with the seller on a purchase price.
Step Two
Agree on the term of the lease. This will be the maximum length of time
you want the opportunity to exercise your option to buy.
Step Three
Determine a market value for your monthly rent. (This is the amount a
person would pay to simply rent the property.) Then add $25 to $200 per
month to be applied toward the future down payment of the home. (This
is not a requirement, but it helps you accumulate money for a down
payment.)
Step Four
Agree upon terms regarding the exercise of the option, such as the
escrow period and financing.
Step Five
Determine who will pay for inspections, work and warranties when the
time comes to complete the purchase.
Step Six
Go to your local Board of Realtors Association or real estate company
and purchase a lease-option agreement form.
Step Seven
Handle the transaction as a lease until you are ready to exercise the
option.
Step Eight
Exercise the option in writing.
Step Nine
Open escrow or contact a real estate attorney to handle the
transaction.
Tips & Warnings
* Escrow is not required until you exercise your option to buy.
* You may want to have a real estate attorney review the contract
before you sign.
* You may be asked to put up option money - typically $1,000 to
$5,000 paid to the seller - for the privilege of having the option to buy.
* All option and additional rent monies paid to the seller are
nonrefundable if you do not exercise the option to buy.
* You must delineate all terms of the purchase at the time you make
the lease-option agreement.
* If home prices go down, you will have to choose between buying
the property at the originally agreed-upon higher price and losing the
option money.