LEASE PURCHASE, RENT to OWN, WHICH?

LEASE PURCHASE

Outside of a short sale, A Lease Purchase still remains the primary route that home sellers are taking to sell a property in today’s real estate environment, especially with   market value still being lower than the mortgage amount. A  lease purchase  also interest the potential  home buyer who is  having  difficulty getting a mortgage loan due to  a recent short sale, foreclosure, bankruptcy or other credit issues.

A lease-purchase agreement is nothing more than a written contract to purchase real estate over an extended period of time, typically not exceeding 36 months.  Real Estate professionals  prefer to expedite  a lease purchase utilizing two contracts.  A lease agreement  that details the terms of the lease and a Purchase and Sales agreement that states the purchase price of the property.

Another popular contract is which some may confuse with a “lease purchase”  is  the  lease-option agreement.   A lease option  is  primarily an agreement to rent real estate. This agreement contains a provision granting the renter the option of purchasing the real estate at some point in the future if he so chooses.

Here’s why it’s working today; lenders have tightened underwriting guidelines and raised minimum credit standards, and there are lots of first-time buyers who have been pushed out of today’s buying market. A lease containing an option to purchase may give the buyer enough time to get qualified and make the purchase he or she wants. In this current real estate environment  some sellers are willing to compromise on a quick sale in order to get some revenue coming in to help cover the mortgage payment.

What exactly is a lease purchase agreement?

Typically, a lease-purchase agreement includes these features:

• A  typical lease or  rental agreement  ( pretty much the same) outlines the relationship between the tenant  and the owner/landlord. This can be the same rental agreement that one might use if they were simply renting for a specific term, then intending to vacate.

• A lease-purchase agreement,  will be  drafted simultaneously with the lease agreement  outlineing the  the purchase price  of the property, specifying the price, the “on or before” closing date, and the other terms and conditions of the sale. In this contract, a non-refundable “down payment” is often made from buyer/tenant  to seller/landlord.  This down payment is usually applied toward the purchase price.

A Lease Option

• With a lease-option, then there may or may not be any “down payment,” and it may or may not be refundable, depending on the agreement. As an alternative, the lease-option agreement may specify a more traditional (and refundable) security deposit.

Rent to own

•  Rent to own,  another common feature .  Of almost all these agreements is  the difference in a lease purchase and rent to own is the provision.  Generally a rent to own  specifies that some portion of each rental payment shall accrue toward a reduction in the purchase price of the property, even if that price has yet to be determined.

A small provision might be a monthly credit of  an agreed upon price , to be accumulated by the owner for use as a credit towards  the purchase price of the property.

To determine the best route for you, consult with a real estate professional, or contact us  or visit  us www.conyersgahomes.com