Thread: lease option to purchase

Couple of things you really need to keep your eyes on is the amount required for the option. In other words, the owner will most likely want you to put some money down as hard cash which some or all will be applied to the purchase price of the home if you wish to exercise the option. If you decide not to buy, then the money is the sellers to keep, no refunds.

The other thing to look for is the agreed purchase price which will mostly be the value of the home in the future (the date of which the option is to be exercised).

Good luck

rob

One more note: you need to get ualified for a mortgage, if you can not get a mortgage then you can not exercise your option. Unless the homeowner is going to finance it for you.

Lease option sales were popular financing instruments in the late 1970s and early 1980s. They were primarily used as a way to circumvent alienationclauses in mortgages. Proponents claimed the sale was not really a sale because it was a lease; however, courts argued otherwise.Today, options to purchase, lease options and lease purchase agreements are three different financing documents. The variances are state specific and not all states have identical laws. Before entering into an agreement with a seller, buyers should obtain the advice of a real estate lawyer. The information below is an overview and is not meant to be construed as legal advice. Hire a real estate lawyer to draw the documents and explain your rights, including those of possession and default consequences. The property might be encumbered by underlying loans that contain alienation clauses, giving the lender the right to accelerate the loans upon sale. Sometimes sellers give the option money to their real estate agent as full payment ofcommission. Agents are not always involved in the exercise of lease options or fulfillment of lease purchase agreements and, even if you have retained real estate agent representation, you still need a real estate lawyer. Agents are not lawyers and cannot give legal advice. In the event of a lease purchase, obtain all the disclosures and do your due diligence just like you would on a regular sale.. This means:

• Get a home inspection.
• Examine the title policy.
• Obtain an appraisal.
• Read seller disclosures.
• Consider obtaining pest inspections, a roof certification, home warranty plan and hiring other qualified inspectors.

Just to highlight a point and add to the great comments here already...

The seller holds title to the property, until the contract is executed (at the very end when you have paid what you owe). So to add to Rob, if for some reason things change whatever you have paid, unless you go through with the full contract, is lost.

If your credit is shot then this may be an option, notice I did not say good option.

Here in NC there are really 2 contracts 1. A lease, and 2. An Option to Purchase.

Most REAgents can not explain either let alone advise you, so my advice is to use an attorney no matter what.

There are so many variations to this it is not realistic to disuss or speculate on.

Good luck.

Are you entering into a lease option contract as a buyer or a seller?

To what Nancy mentions, generally all residential mortgages have acceleration clauses. They are designed to protect the bank's secured interest in the property. When the property owner sells they are selling the collateral that is securing repayment of the purchase. The mortgage is actually the device that the property owner gives the bank and obligates the owner to repayment.

The lease/purchase option is sometimes an item that will trigger acceleration as well. Nancy is right in that sometimes the lease will be considered an owner financed sale. You need to look at the facts, is this a long term lease 20 years? Is there a nominal purchase price at the end of the lease term? and so on...

In the end the principle of nemo dat applies. The owner can't give more than they possess. If the owner is bound by contract to the lender and is attempting to skirt around the contract with an option you could get stung. Read your contract and inquire about the owner's financing and ownership arrangement of the property.

Try listing the terms as you read, if it is too dense get some help from a real estate attorney.

If you want to lease a house with an option to buy it, you first need to talk to a loan officer or a mortgage broker, just like a buyer seeking a mortgage loan even though you want to lease the house first. You need to know whether your financial situation or your projected future financial situation will enable you to get a mortgage loan to exercise the option and purchase the house within the term of the option. If the likelihood of getting a mortgage loan within the term of the option is low, you should not enter into lease-option contract, instead, just lease that house. If the likelihood of getting a mortgage loan within the term of the option is high and the property value in the surrounding area is rising, you could consider lease-option. Before signing a lease option contract, you should consult a real estate attorney.