| Lease option is one alternative to buying real estate | | | | from the tenant or seller. Tenants are prohibited from |
| without having to qualify for a mortgage loan. This | | | | transferring lease agreements without written consent |
| option can be a good choice for people with | | | | from the property owner. Sellers are prohibited from |
| less-than-perfect credit because it gives buyers time | | | | selling the home unless the buyer breaches the |
| to build or restore credit. Real estate investors often | | | | contract and is given notice of default through the |
| offer rent-to-own contracts to credit-challenged | | | | courts. |
| tenants in order to generate long-term cash flow for | | | | Contractual agreements should include provisions |
| investment properties. | | | | which allow the buyer to decline purchasing the home |
| Lease option home buying contracts can be arranged | | | | when the lease option expires. In most cases, buyers |
| to accommodate the needs of both buyer and seller. | | | | who back-out of the sale forfeit option money and all |
| Most property owners require buyers to provide a | | | | funds contributed toward the purchase. Most |
| down payment, referred to as option money, to | | | | rent-to-own contracts include a breach of contract |
| secure the purchase at a later date. Option money | | | | penalty which includes a specified amount of money |
| requirements can range from 1- to 25-percent or more | | | | payable to the seller. |
| of the purchase price. | | | | Lease-to-own homes can be financially beneficial to |
| Purchase agreements must adhere to certain aspects | | | | both parties. By providing seller carry back financing, |
| of real estate law. Contracts are legally binding and | | | | property owners can attract buyers who cannot |
| should include legalese which protects both parties in | | | | otherwise afford to buy a house. Tenants are given |
| the event of default. At minimum lease-to-own | | | | the opportunity to establish a record of financial |
| contracts should include sale terms, monthly | | | | responsibility and improve credit scores necessary to |
| installments, percentage of funds contributed toward | | | | obtain financing through a conventional mortgage |
| the purchase, interest rate, expiration date, and | | | | provider. Tenants also accrue home equity by |
| purchase price. Some sellers agree to lock-in a | | | | contributing monthly payments and option money |
| purchase price while others require tenants to pay | | | | during the leasing contract. |
| current market value when rental contracts expire. | | | | Always obtain legal counsel before entering into a |
| Lease option contracts usually extend between one | | | | lease option contract. Engage in due diligence by |
| and three years; however, terms are negotiable. | | | | obtaining real estate appraisals and home inspections. |
| Throughout the leasing terms, a percentage of tenant | | | | Search public records to ensure the home is not in |
| rent money is applied toward the purchase price. | | | | foreclosure. Conduct background and credit checks on |
| Applied rent monies can range between 1- and | | | | the seller. Unfortunately, real estate fraud is at an |
| 100-percent, but rarely do buyers apply the full rental | | | | all-time high, so it is crucial to investigate sellers in the |
| rate. On average, 10- to 25-percent of rent is | | | | same manner they investigate potential tenants. Taking |
| contributed toward the purchase. | | | | these actions can create a win-win situation and |
| When rent-to-own agreements are in place neither | | | | ensure a smooth and ethical home buying experience. |
| party can rent or sell the property without approval | | | | |