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LEASE PURCHASE & LEASE OPTION...HELP?
Hey, Can someone simply outline these for me? There is a home...a very nice home(5 bed 5 bath inground pool finished basement etc...etc..)...it is $1.3M ($1,300,000). It has a lease purchase or lease option available. What will my monthly payment be with either choice? I understand that with lease PURCHASE I have to put a percentage of the market price down before contract. Which of these choices will benefit me? What exactly is the difference? Someone who has been through this or works in real estate would be of great help. THANKS!
Public Comments
- There is a lease with option to purchase. That means that you will rent the place for fair rent value, whatever that is and at some point in time you have the option to purchase the property at some fixed price. Sometimes you can apply part of the rent toward the purchase. For example if your rent is $3,000 per month and the option price is $1,300,000 and the rent applied to price is $500. At the end of one year the purchase price will be $1,294,000. Then there is a purchase where you must pay a down payment of approximately 20%. The remainder of the purchase price must be borrowed and the payment will depend on the interest rate and amortization period.
- Lease option-- you pay an option fee( 5%-20%), and you have the right to buy the house at a later date. But at this point you do not have the obligation to buy. You also pay a monthly lease fee. Lease Purchase--you are leasing it with the right and the obligation to purchase the property.
- If you want to buy the property with a lease option, not a lease purchase, in this lending climate, the banks are uncertain. To protect yourself as a Lease Option Buyer: *Have all reinspected (subtracted from) to the future exercise price. *Have the exercise price tied to a new appraisal in the future. You don't want to buy a depreciating asset. *Have a memorandum of option to disagreement against the property to prevent the owner from re-mortgaging the property. *Open an escrow with a Sale and Purchase Agreement filled out except for purchase price and signatures - date *Have a lawyer look it over for possible headaches such as what if the seller dies, gets sued, does not pay the PITI, etc.) Everything is negotiable in a lease option. If you are paying the PITI as a lease option buyer to convince the Seller to sell to you, try to get 100% rent applied to a reduction of sales price with the the sales price tied to a new appraisal. DO NOT lock in the sales price today, especially if your market is currently depreciating in value.
