What is a lease option?


A lease option agreement is basically a rent-to-own agreement. The “tenant”, also know as the “tenant buyer”, signs lease agreement for a period of time and also an option agreement to purchase the property at some point in the future at a set price.

The benefit of the option agreement for the buyer is that it gives them the option to purchase any time between now and some point in the future at a pre-set price. This helps avoid having
to move into an apartment during the time in between. The buyer often uses this time to accumulate a larger down payment for a mortgage or improve their FICO credit score.

This method can be advantageous for the seller/owner because they some cash coming in without having to wait for the property to sell through retail channels, plus they get to work with a serious tenant who shares their interest in keeping the property in good condition.

Buyers who are currently rebuilding their credit may be able to set something up where they make payments through a servicing company that reports the payments to the credit bureaus.

A seller who does not have a lot of equity in the home can be a great candidate for this type of arrangement, as long as they are able to continue to own the home during the rental period.

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