What is Lease Option?
Lease Option is a way to buy and sell properties without the need of an immediate conventional mortgage. It gives buyers who can’t qualify for a mortgage right now the opportunity to get into a home right away while they improve their credit scores and build up a downpayment while living in the home.
For sellers, they get to beat their competition; in which we know in this kind of market, competition is huge. Sellers can reach a far greater pool of potential buyers. They will likely be able to sell their homes quicker and for a better price. For some sellers, it may be the ONLY way they can sell their home in this real estate market.
How does Lease Option Work?
A lease option works like this: The buyer and seller agrees to an option which gives the buyer the right to purchase the home during a set period usually through a tenure period of 3 or 5 years. During this option period the buyer leases the home from the seller.
By the end of the option the buyer must either execute their option to purchase or forfeit their option fee. While the option is valid, the seller cannot sell their home to anyone else.
The purchase price upon entering the contract is set per average property price increments at approximately 5% to 10% per annum. The price set is based on the number of tenure years which is either 3 or 5 years.
Lease Option allows you to plan a financial map, making it much easier and highly likely for your housing loan application to be approved.
Advantages For The Seller
1. Often receives a higher purchase price above the market value
2. Greater access to a larger market of buyers
3. Able to collect rent while the home would otherwise sit vacant
4. Able to sell of the property even when the market is slow or facing a downturn.
5. Even if the buyer pulls out of the agreement, the option fees will not be refunded and will be treated as rental.
Advantages For The Buyer
1. Low capital required to start the process of purchasing your home under Lease Option
2. Ample time to clear all financial credit issues to make it easier to obtain a housing loan while already staying in the home.
3. Buying power of the purchaser has increased
4. Buyers are not obligated to exercises the option to purchase if they decide not to due to numerous reasons.
To learn more about buying properties, register for the free class here.
