Rent With the Option to Buy – What This Precisely Means
If you are looking for a house to rent or even looking for a house to buy then chances are you have run across an ad for rent to own or lease option programs for a house. While you may have a general idea of what exactly this is, let me explain the pros, cons, and what exactly this entails.
A lease option or a rent to own home are the same thing. It’s like saying run and dash. They essentially mean the same thing. For this article, we will use the term lease option. Lease option is two agreements that are independent of each other. The lease is an agreement to rent a property for a determined amount of time. It covers the monthly payment, the length of rental and all the things that go along with renting a property. The option is an agreement that the owner of the property will sell the property to the renter or leasee at a predetermined amount and predetermined terms. In other words, it says that the seller will sell the property to the renter at a set price within a set amount of time. So for example, the seller may say that you can rent this house for 1 year at $1000 per month. Within that year, the renter has the right or option to purchase that property at a price of $100,000. Now it is an option so on the renter or buyers side, they don’t have to buy the house. The buyer may decide that they don’t want the house or that they don’t like the area or any other number of reasons not to buy. It is completely at the buyer’s discretion if they choose to exercise the option or in other words use their option to purchase.
So you may ask what is the benefit of this option to both parties? Well first for the seller, they are able to set an agreed upon sales price and potentially put a buyer into the property. In addition, it is common for the seller to get an option deposit. An option deposit is kind of like a fee that the seller can charge to the buyer to have the right to buy the property. Why would a buyer agree to that? Well it’s simple. The buyer knows how much they will pay for the house and they know that no one else can buy the house while they are working toward buying it. Many sellers use this as a technique to attract buyers who may want to buy a house but for one reason or another, they can get financing or don’t want to get financing yet. Maybe the buyer wants to try out the house first or try out the neighborhood for a couple of months before they commit to a long-term purchase.
The other benefit to a seller is that if they have been trying to sell the property for some time and had no luck then this gives them a chance to get out of making the monthly payment and kind of allows them to back into a buyer thru a renter. Overall, for all parties involved it can be a very gratifying experience. There are many pitfalls to look out for. Some are due to poor planning while others are due to bad business practices by a seller. Keep reading my articles and I will discuss some of the risk involved with lease options.
Until then good luck and God Bless!
Arthur V. Veal IV is the owner of We Buy Houses Home Services, a real estate investment company. They specialize in selling houses with owner financing. They have sold hundreds of houses to deserving families that were not able to get bank loans at the time. His company boasts an 83% success rate when helping their buyers refinance the house that they get owner financing on. Find out more about these programs by visiting the site at http://www.ownwithnobank.com
