Business, Money, and Finance Discussion Blog

• It’s an almost sure sale, which can be important if it’s a tight market. The difference between a lease-option and an outright sale is time—even though the seller has to wait to get his or her money, the seller still usually gets a sale.
• The selling price is locked in. Yes, prices might go up during the lease-option period (in which case the seller would lose), but prices might also stagnate or even go down. With a lease-option, the seller knows what he or she is going to get for the property. And in some cases it may be possible to tag an automatic inflation increase onto the price. read more »

1. They locked in a purchase price three years before they actually bought. That gave them an automatic equity in the property at the time of the purchase.
2. They locked in a rental rate and avoided rent increases that regular tenants had to face. read more »

Note that upon the close of escrow, Jason and Amber will have an automatic equity in their property of over $31,000. Further, they will get cash back of $10,000 (after paying costs of purchase) to do with as they wish. They have no out-of-pocket expenses. read more »

So they decided to try a lease-option. Their rent would be $1,500 a month for three years. (That was $250 over market rate.) And the seller would credit them with $500 a month if and when they made the purchase. Over three years that would come to $18,000. read more »

For you as a buyer, a lease-option can be a winning situation. Yes, you probably will have to pay an additional amount in rent. Yet all of the additional amount plus part of the regular rent will likely be returned to you as a credit when you make your eventual purchase. read more »

Further, to help ensure that buyers could quickly accumulate the necessary down payment, sellers would add a bonus. They would apply not only that excess rent toward a down payment but some of the regular rent as well. read more »

Of course, there is a catch. Usually the seller will insist on a monthly payment that’s higher than you’d otherwise pay if you were simply renting the property. For example, if the market rate for rent on the home were $1,000, the seller might insist on a monthly rent of $1,250. read more »