Lease-option transactions provide a beneficial method of creating a path to a sale of a property for an interested purchaser-your tenant! While we previously reviewed the many benefits to a seller in entering one of these sale transactions, there are also at least four reasons a buyer should consider requesting a lease-option for a home they love. For the buyer who needs to rent today, and may have difficulties obtaining a mortgage in the future (self-employment, recent bankruptcy) a lease-option can provide solutions to your desire to acquire and own a home.
Here are four buyer benefits for requesting a lease-option transaction:
Cash Requirements are Less Than a Home Mortgage
Compared to a purchase using a mortgage, even a low down-payment mortgage, the cash requirements to create a lease option are small. The first months rent plus the purchase option amount (usually a similar amount as a security deposit) is almost certainly less than a down-payment and closing costs in a purchase.
Saving for a Down Payment
Each month, the agreed rent credit (an amount paid as part of the buyer’s rent that will be credited as a down-payment on a sale) will continue to accumulate. As a tenant-buyer, the figure you are paying is your rent. But, behind the scenes you are actually accumulating, through a forced savings plan, the down-payment for use to purchase the home.
Flexibility of a Lease
You are still in a lease so you have the option not to activate the purchase option. You also do not incur the typical homeowner expenses that come with owning a home. It’s the best of both worlds, a try before you buy plan.
You Have the Option to Purchase the Home
The buyer controls whether they decide to buy the home or not. The value of the home may change from the agreed-to purchase price. You may decide you do not like the neighbors. You may learn how much you love the area that you never want to leave, but you just learned your family is going to grow and you need an extra bedroom. You have the option to buy and all that is really at risk is the option money paid up front. If you do not select to purchase, those funds are usually considered your security deposit. The security deposit would have been required in a lease and would have been at risk also. So, the flexibility and control you have as a buyer is significant.
As we conclude this series of posts on lease-option sales, you can refer to the basics and the seller benefits for more information. If you believe a lease-option might fit your financial goals, lets discuss how we can assist in structuring the transaction.