What is Lease-to-Own?
By J. Kerr
Photo: © Erics Photography / Dreamstime
Lease-to-own contracts are generally offered on homes that are difficult to sell or to buyers who cannot obtain financing. Although the term "lease-to-own" sounds self-explanatory, it can actually be a complex legal process. For that reason, general guidelines are given here but it's always best to discuss a lease-to-own contract with a real estate professional to determine if this is the right option for you.
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When a buyer and seller decide on a lease-to-own purchase, a contract is drawn up between the two parties. In this contract, the buyer agrees to pay a certain price for the property, usually market value, and the buyer agrees to purchase the property within a certain amount of time. Lease-to-own contracts are commonly from six months to three years in length.
Once the selling price and the length of the lease-to-own contract are decided, other factors are negotiated. A rental amount is determined, and some portion of that rental amount will go toward the purchase price. Unlike a standard rental or lease agreement, though, a lease-to-own buyer is generally responsible for everything an owner would be responsible for. This includes taxes and maintenance on the property.
The lease-to-own buyer also pays the seller an amount of money up front; the exact amount is negotiated between the two parties. This is often called "option money" and it is usually non-refundable if the buyer for some reason doesn't fulfill the lease-to-own contract. |
