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Selling
Your Home - Q & A
Lease Options
Q.
What is a lease option?
A. When
a renter signs a lease with an option to purchase the property
for a specific price within a certain time frame, that is called
a lease option. In most lease-option situations, a portion of
the rent is applied to a future down payment.
Lease options
are most popular among buyers who don't have enough funds for
a down payment and closing costs.
Q. Where
do I get information on lease options?
A. For
information on lease options, "How Lease Options Benefit
Realty Buyers, Sellers, Agents and Investors" is available
for from Tribune Media Services, 435 N Michigan #1500, Chicago
IL 60611. 1-800-245-6536,or "Publication House", Burlingram
CA. 1-800-736-1736
Q. How do
lease options work and what are the benefits?
A. Most
lease-option agreements specify that a portion of the rent on
the property in question is applied toward the purchase if the
option is exercised. This is referred to as rent credit. Institutional
lenders accept rent credits as part of the down payment if rental
payments exceed the market rent and if a valid lease-purchase
agreement is in effect, a copy of which must be attached to the
loan application.
For sellers,
lease options give them several advantages, especially in a slow
market. These include a monthly rent higher than market rent,
top-market value for the property and tax-free use of the option
consideration until the option expires or is exercised. Also,
the renter is more likely to treat the property like an owner,
tax-free use of option consideration until the option expires
or is exercised.
Lease-options
should be read carefully for details on transferring the option
and other important concerns.
For more information,
get a copy of "How Lease- Options Benefit Realty Buyers,
Sellers, Agents and Investors," available for $4 from Tribune
Media Services, 64 E. Concord St., Orlando, FL 32801.
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