During the time I’ve been buying and
selling homes as a real estate investor I have, on a few occasions, chosen a lease option agreement as an alternative to selling or leasing a house. Actually, a lease option agreement is really a combination of both a sale and a lease.
Buyers who are interested in a home I have for sale may find themselves in need of more time to rebuild credit and save money to qualify for a mortgage. When I’m considering how to sell my home so that it works for them sometimes I suggest a lease option agreement. I’ve noticed that most buyers are not familiar with
lease option agreements, so I explain how I’ve used them in the past and why a lease option agreement might be a good solution for them, too.
The majority of real estate agents avoid lease option agreements because they don’t have any experience with the form and, more importantly, the arrangement can delay or negate their commission. I had my attorney draft a lease option agreement for me to use, but all sellers don’t have an agreement handy so you might want to have one yourself in case you need it.
Now I’ll explain how a lease option agreement works. It’s basically a lease with an added right for the tenant, which is called an option, and it’s the right to purchase the home at a specified price on or before a certain date. Like I said, it is basically a lease that includes an option as part of the lease, and that is a benefit to the tenant/potential buyer. Sometimes I require my buyers to pay a fee, called an option fee, when they sign the lease. And sometimes I ask for an additional monthly amount added to the lease payment as part of the option fee. It just depends on the buyer’s own situation.
Actually, I am making a commitment to hold the house for my tenants no matter what happens to real estate prices during the course of the lease term, and I am obligated to sell my home but the tenants are not obligated to buy it. So, buyers pay the option fee for their privileges, their legal rights as regards living in and purchasing the house at a certain price, and all the money they pay as an option fee will definitely reduce the price of the home at the time of closing. However, the option fee is non- refundable if they don’t ever choose to purchase the home.
I have definitely found that lease option agreements make a difference for my buyers when we discover we need an alternative to make a transaction work. A lease option agreement can be the most practical solution for me and also for my tenants when I’m considering how to sell my home