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Lease-Purchase not really available in Texas: Here's Why

By
Real Estate Agent with Keller Williams Realty

People often call our office looking for a lease-purchase. The thing is, we don't do those in Texas much. Which is usually fine with them once they learn more about it, so I thought I would blog on it.

A TRUE lease-purchase is one in which the tenant-buyer is under contract to purchase the home at the end of the lease. The lease rate is $2-300 over market rates, and the landlord-seller is supposed to be depositing that additional money monthly into an escrow account, to be used by the tenant-buyer for part of their down payment at the sale. Are you starting to see where this can go wrong? The seller just takes the additional money and doesn't properly escrow it for use by the buyer. Additionally, the tenant-buyer needs other protection--what if something happens to the seller during the lease?

Because of these problems, and because residential real estate law in Texas is derived from consumer law which would protect the tenant or buyer more than the landlord or seller, Texas has come down on the side of eliminating lease purchases from real estate agent transactions. WE HAVE NO FORM FOR IT. If you did have the perfect situation, and everyone was in perfect agreement and absolutely trustworthy, a real estate agent could help by completing a one-year lease and a purchase contract with a one-year closing date, but an attorney would be required to provide a document that would tie the two together, outlining the moneys to be escrowed, the escrow process and agent, etc.

Usually, potential tenant-buyers really just don't want to move twice, and who can blame them? But when a knowledgable agent can explain what is really involved, they are happy to just lease something for a year and then come into the market for purchase at that time.  Much better.

Comments (2)

Brenda Mullen
RE/MAX Associates - San Antonio, TX
Your San Antonio TX Real Estate Agent!!

I agree.  Lease-Purchase is such a tricky situation and usually a bad deal for the buyer.  I have had plenty of clients ask me about them, but I usually talk them out of such a thing.  Thanks for the insight!

Aug 23, 2009 08:13 AM
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

And it's not just that there is no form for us, the Realtor, to use, it's that the title companies' attorneys won't allow such a closing unless it's coming straight from an attorney.  They don't want the liability of linking a lease with a purchase contract.  They're two separate things.

Aug 23, 2009 08:31 AM