In actuality, a lease purchase agreement is just a contract to purchase a house over a period of time, generally not more than two or three years. It is usually part of an agreement allowing the buyer to live in the house and pay rent on it prior to closing. It’s a good contract for my purposes so I often think about using a lease purchase agreement when I’m considering how to
sell my house.
So that nobody gets confused right about now, I need to explain that there’s a separate form called a lease-option agreement, not the same as a lease purchase, which is simply a lease agreement that includes language giving the tenant an option to purchase the house in the future if he decides to do that. When I enter into a lease option agreement with my tenants they have a right to buy the house by the end of the lease period. Assuming they make the decision to buy it, I am obligated to sell the house to them at the contract price. For the privilege of locking-in a price and having a year or two to make their decision the tenants pay an option fee that is credited toward the purchase price of the house. If they do not buy it, I keep the option fee. I have an obligation to honor the option agreement and sell the house, but my tenants can choose not to buy the house. Actually, the tenants have the greater benefit.
But a lease purchase agreement obligates the buyers immediately. They don’t have an opportunity to change their mind about buying the house, in fact it obligates the tenant to buy the house with his monthly payment, but he doesn’t take title until closing. I have become acquainted with several buyers who really needed to find a creative way to buy a house. That’s why a lease purchase agreement is one of my first ideas when I explain how to
sell my house to prospective buyers who need a little more time to qualify for a loan.
It’s well-known that lenders have tougher underwriting guidelines and higher credit standards these days, so many first-time buyers are having a hard time finding a house in the present market. A lease purchase agreement may accommodate the needs of some interested buyers and provide the ability get into a house right away.