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What is a Lease Option?
A lease option (more formally Lease with the Option to Purchase) is a type of contract used in both residential and commercial real estate. In a lease-option, a property owner and tenant agree that, at the end of a specified rental period for a given property, the renter has the option of purchasing the property.
A lease option is different from a lease purchase contract, in that a lease purchase binds both parties to the sale, whereas in a lease-option the buyer has the option but the seller does not.
The example below describes a typical lease-option for residential properties; commercial lease-options are typically more complicated.
The contract is typically between two parties: the tenant (also called the lessee or tenant-buyer), and the landlord (lessor), who owns or has the right to lease or dispose of the property.
Lease Option Payment or Fee:
In order to have a valid option the tenant-buyer must provide “valuable consideration” (a fee, non-refundable option deposit) for the option. The option gives the tenant the right (but not the obligation) to purchase the property at a later date. The lease option only binds the seller to sell, it does not bind the buyer to buy. That makes it a “unilateral” or one-way agreement. In contrast, a lease-purchase is a bilateral, or two-way, agreement.
Buyer purchases the option. The parties agree to what the option’s price will be. It can range from 3- 5% (or more) of the value of the property. The option fee usually is non-refundable. That is, if the tenant-buyer fails to exercise the option, the money remains with the seller. It is not refunded because the option fee is not a deposit. The option fee has been used to purchase something of value, the option.
The basic elements of a lease-option are:
How much is the monthly lease payment? Whether you are renting or leasing with the option to buy, you will be paying the fair rent market value for that property. However, in most cases some of the lease monthly payment is to be credited towards the purchase price of the property. Often, the monthly lease payment is slightly above the fair market rent of the property. So, for example, if fair market rent for that unit would be $1,000, the seller might charge $1,200 with $300 of that being credited toward the purchase price. Again, the extra rent is non-refundable if the buyer does not exercise the option to buy. Everything functions like a lease except there is a schedule when the buyer can decide to purchase the property.
Maintenance and Repair:
In a lease option, typically the tenant-buyer is responsible for all maintenance and repair, utilities, pets, how many occupants, ability to make modifications to the property, and so on. Basically, the owner is responsible for taxes and insurance. In a lease-option, often a greater burden for repairs is shifted to the tenant-buyer.
During the term of the lease option, the tenant makes lease payments to the landlord for the use of the property with the terms mutually agreed. At the end of the contract, the tenant has the option to purchase the property outright. The tenant does so by going out and getting a mortgage loan.
Reasons for using a lease option
How Do I Find Lease Option property?
At JV Real Home Solution, we specialize on lease option
We understand that buying a home in today’s market place is more difficult than ever before. Banks and others financial institutions require home buyers to have a very good credit score, usually 720 or better, a huge payment of 20% down, a long employment history and low debt-to-income ratio. Besides other things, these guidelines are making the process of home ownership more difficult for home buyers to qualify for a loan.
For these reasons, we are offering the Lease Option Program to those potential buyers who may not qualify for a bank loan. We help our clients find the perfect home that meet their needs, by providing owner financing with a low-down payment and no bank loan or credit check. We make the process of home ownership more affordable for everyone.
Lease Option, is one of the best and easiest way to become a homeowner because it offers the advantages of home-ownership before even buying the property.
Either, buying, selling or renting a home, we are here to help in your journey
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Call/Text 718-581-3399 or Email Us at: firstname.lastname@example.org
- Buying: own your home with no Bank Loan or Credit Check.
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- Renting: rent to own your next home
Our goal is to help you accomplish your goals and live the American dreams of home ownership regardless of your Credit!