Leasing with the Option to Buy
Of all the many ways of selling and buying real estate, leasing with an option to buy is one of the most creative home finance alternatives if you have bad credit or no credit at all. Some people who currently can not qualify use it to lock in a price against future appreciation. It also a tool to use (if you rent your property) to attract good tenants.
Leasing with an option simply means the renter signs an agreement stating that the renter can buy the property at the end of an agreed upon time period. The owner is obligated to sell at the option price, but the tenant is not obligated to buy.
It does NOT mean however, that the Owner has to sell to the Renter. A common misconception is that once a landlord signs this type of agreement, he has to sell the property to the tenant, or that the tenant has an absolute right to the property. Not so – the tenant can buy the property only if the landlord exercises the option to sell. An advantage for renters is the fact that they get more time to qualify for mortgage financing. So get to work on that side of the equation.
Make sure that everything is stated clearly in a written document BEFORE you move in. Its always a good idea to get an attorney who specializes in Rent to Own contracts to advise and oversee. Make sure a portion of the rent is applied towards the purchase, IF the option to Buy is exercised.
All of this should be recorded with the County Clerk.
On the Owners side, the agreement should have a termination clause if the tenant violates the lease or gets evicted.
Some items to cover in your agreement include: Down Payment; Purchase Price; Legal Title and Rent Credit.
Think about it....... if you are Currently Renting and Plan One Day to Own Your Own Home, Leasing with an Option to Buy may be worth your effort. Hope this Helps.!