SCOTTSDALE LEASE OPTION AND LEASE PURCHASE
Lease Option or Lease Purchase Agreements, commonly referred to as “Lease-to-Own” Agreements are commonly used interchangeably. But they are different!
Lease Option or Lease Purchase agreements allow a potential buyer to occupy the seller’s property for a period of time before completing the sale. This arrangement can assist either or both parties in meeting their goals and needs with respect to the transaction and their specific circumstances. In some instances, these agreements may even allow a buyer the opportunity to build a bit of equity in the home as well.
There are disadvantages to purchasing real estate with a lease option or lease purchase agreement. These agreements can be a solution for some potential homebuyers, but it’s not right for everyone. There is a risk of losing the option fee or downpayment if you decide to not purchase. If you’re not certain that you’re going to be able to purchase the rental home at the end of the lease period, you might be better served with a standard rental agreement.
In a typical arrangement, the borrower pays an option fee, 1% to 5% of the price, which is credited to the purchase price. The borrower pays a market rent, and an additional rent premium that is also credited to the purchase price. The option fee, option period, rent, rent premium, and purchase price are all negotiable items. If the purchase option is not exercised, the buyer loses both the option fee and the rent premium.
A lease purchase agreement is an agreement in which the buyer and seller enter into both a lease agreement and a purchase contract at the same time. The buyer will lease the property, for example, for one year, and at the end of the one-year period the buyer is obligated to purchase the property by closing escrow.
A lease option is different from a lease purchase, in that a lease purchase binds both parties to the sale, whereas in a lease-option the buyer has the option but the seller does not.