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©
2002 Ruth E. Campbell. |
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Frequently Asked Questions Buying
a Home - Q & A 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?
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. |