Today’s economy has undoubtedly raised the level of uncertainty for buyers and homeowners. Will home prices decline further or have we hit bottom? No one wants to pay too much for a home or sell their property for little. An uncertain job market and economy make many people hesitant to leap into home ownership. Many seeking to own a home face another obstacle in getting a mortgage. Many banks now require larger down payments. Renting a home with a lease option may provide an excellent way for a renter to become a homeowner in just a few short years. If a seller has the ability to wait-out the sale, a lease option may make sense.
In a lease option contract, sellers and buyers negotiate most items, and, the contract commonly ranges between a year and three years. A lease option provides a number of very attractive features that help make buying and selling a home a little easier. One positive aspect of a lease option is the potential to lock in a purchase price at the outset of the lease. This factor can benefit both parties. Everyone will know how much the house will sell for at the end of the lease period.
For the buyer, a lease option offers a place to live while saving to buy a home. However, one of the primary benefits of this type of lease is that a portion of the rent payments will be credited toward a down payment at the end of the lease period. This money won’t be returned if the buyer decides not to purchase the property or can’t qualify for a mortgage.
For the seller, they benefits from the rent money received during the lease; and, a tenant in a lease option often maintains the property better than a typical renter. After all, the tenant plans to become the owner of the home at the end of the lease. Also, a lease option includes a first and last month’s deposit, as well as an additional upfront payment. A buyer who cannot complete the purchase usually loses the deposit and upfront payment. If the tenant doesn’t purchase the home and did not care for the property, the upfront payment and deposits protect the seller.
Before signing on the dotted line of a lease option contract, both the buyer and seller need to do some extra homework. A real estate attorney should review the contract to ensure the contract treats each party fairly. It’s also important to get a home inspection and appraisal to be sure the home is in good shape and worth the sales price stated. A lease option is a serious commitment, so everyone involved needs to clearly understand all the details of the arrangement.
Use care when entering a lease option agreement to purchase a home. A lease option offers a great chance for a potential buyer to gain extra time to build up an adequate down payment and lock in a good sale price. It also offers a taste of the benefits and challenges of home ownership. In the meantime, the seller collects rent and gains a responsible tenant for their property. Although the seller keeps any upfront money paid, a lease option provides an out for a buyer if their circumstances change. In these uncertain times, a lease option can offer an excellent opportunity for both the buyer and seller of a home.
CONTACT ME FOR A CURRENT LIST OF PROPERTIES IN CLEVELAND’S WESTERN SUBURBS THAT OFFER LEASE OPTIONS (ROCKY RIVER, WESTLAKE, BAY VILLAGE, FAIRVIEW PARK, LAKEWOOD, OLMSTED FALLS, AVON AND AVON LAKE).