How Lease-To-Buy Option Works

Posted by on February 11, 2013 in Real Estate | Comments Off on How Lease-To-Buy Option Works

If you are having trouble with purchasing a home then you must have thought of ‘lease-to-buy’ option.  Lease-to-by option is a growing trend among home buyers who are struggling with their poor credit scores.  These buyers can rent a property where the payments is counted in purchasing a home within a period of time.  For some individuals, this purchase option is a win-win situation for both the seller and the buyer.  Sellers can sell  properties especially those sitting in the market for quite some time.  Buyers, on the other hand, can purchase  home even if they have a poor credit, can’t qualify for a mortgage, and without any down payment.

How does Lease-To-Buy works?
A buyer draws up a contract with a seller and pays monthly rental payments (generally non-refundable) which is often higher than usual rental rates until the agreed amount (predetermined price) has been paid within a specified period of time.  Generally, the agreement lasts only from two to five years.  At this time, the renter can choose to buy the property and if not, the seller can keep all the payments and evict the renter to open the property for other possible buyers.  RTO properties or rent-to-own programs are not exclusive to homes, but are also becoming popular among condo developers.

What are the advantages?
A.  For the Seller

  1. Monthly rent from the tenant at a specified time.
  2. You can sell a property that has been on the market for quite some time.
  3. You can keep the upfront fee if the tenant decides to discontinue the agreement.
  4. Since you still own the home, you can retain tax-shelter benefits.
  5. Your property is well-taken care of because the buyer wants to buy it in the future.
  6. No worries if a tenant decides to discontinue the agreement.  You have a larger market to promote the property.

B. For the Buyer

  1. You won’t feel like your monthly rent isn’t going anywhere because you have the option to buy the property.
  2. A portion of your rent goes to building equity.
  3. Your monthly rent goes to your down payment.
  4. You have enough time to decide whether to rent or not.
  5. You can buy the property at any time during the contract.
  6. You can build your equity and increase your credit score.