Lease options-Lease Purchase
In today's market, we are beginning to see increasing number of homes advertised as lease options and lease purchases. We want you to do your research before entering into either arrangement. The Texas Association of Realtors does not have a promulgated form for this type of trannsaction, so I would suggest consulting a real estate attorney. Real estate differs from state to state hence the urging to contact a professional for legal advice. This information is meant to just open a diaglogue. So here goes.
Back in the 1970's early 1980's lease option sales were popular. Today, options to purchase, options to lease and lease purchase are 3 different ways of financing .
A basic option is secured by paying a fee to the seller for future right to purchase the property. The option fee can be large or small it is simply what is negotiated and the time to purchase is negotiable. The seller agrees not to sell the property to anyone else but if the buyer does not exercise his option, he loses his option money.
In a lease option , the buyer pays the seller option money for the right to later purchase the property. You may agree on a purchase price to lock in the amount. Remember the option money is usually not refundable and not credited toward the purchase price. At the end of the option period, you are not required to buy the property and the option ends.
In a lease purchase the buyer pays the seller option money for the right to later purchase the property. The Seller may ask for a larger amount for this option. a portion of the lease price may go toward the purchase price but the option money is not refundable and may not apply to the down payment. The buyer cannot assign the property, agrees to pay all fees associated with the upkeep of the property including taxes and insurance. The buyer is obligated to purchase the property.
Hint: How are you going to finance the property at the end of the option period? Can you get a loan?
When you hire a Realtor you have hired someone to look after your interest and the same holds true when you retain an Attorney to draw the documents, explain your rights etc. Agents are not lawyers and cannot give legal advise or draw up documents. So dig deeper if you are considering an option, retain the right representation and good hunting.