Where do I get
information on lease options?
Question:
How do lease options work and what are the
benefits?
Answer:
A lease
option is an arrangement with you and a seller to exercise the option to
buy a house after you have rented it for a specific period. A portion of
your rent would applied toward the purchase if the option is exercised.
This is referred to as rent credit, which most institutional lenders
will accept as part of the down payment if rental payments exceed the
market rent and if a valid lease-purchase agreement is in effect, a copy
of which must be attached to the loan application.
If you are a seller, lease options can give you several advantages,
especially in a slow market. These include a monthly rent higher than
market rent, top-market value for the property and tax-free use of the
option consideration until the option expires or is exercised. Also, the
renter is more likely to treat the property like an owner, tax-free use
of option consideration until the option expires or is exercised.
Read any lease-option arrangement carefully for details on transferring
the option and other important concerns.
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Question:
What is a lease option?
Answer:
When a
renter signs a lease with an option to purchase a property for a
specific price within a certain time frame, that is called a lease
option. In most lease-option situations, a portion of the rent is
applied to a future down payment.
Lease options are most popular among buyers who don't have enough funds
for a down payment and closing costs.
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Question:
Where do I get information on lease
options?
Answer:
Contact your real estate agent (some even specialize in
such transactions) or read up on lease options at the public library. If
you have a real estate attorney, ask if he or she has any prepared
information you can review. Most bookstores have a fairly hefty real
estate book section these days. Many current real estate books have at
least a section on lease options.
If you are
considering a lease option, be sure you do your homework first. And have
an attorney or financial advisor on hand to review any paperwork before
you sign.
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