The term you hear most often is the simple ‘lease option’ – actually short for “Lease with the Option to Purchase”. It is an agreement made between a home owner and renter that includes a provision giving the tenant the opportunity to purchase the property at a pre-determined price at the end of a rental period at the tenant’s option.
In the 2012 real estate market with tight lending stipulations, the provisions of a lease option agreement can make sense for sellers under certain circumstances and be attractive to potential Capital area buyers as well! It’s important for Augusta Maine property owners to evaluate the advantages and disadvantages of using a lease-option to appeal to potential buyers.
One advantage for the seller in a lease option can be the terms. Among the variables that can be negotiated when drafting an Agreement are the price of the monthly lease, purchase price, and the term of the lease. Since the possibility of home ownership is part of the agreement, these terms can frequently be agreed upon more favorably for the seller than would be the case in a simple lease or rental negotiation – especially since the seller can choose to offer flexibility in the lease term, option term, rental credit towards purchase, refundable or non-refundable option money down, repair and tax responsibility, etc.
A landlord-seller may be able to negotiable a higher rent and even higher sales price by providing the tenant-buyer any number of favorable terms. Another key advantage of the lease option is the quality of tenant Augusta Maine area sellers may attract. Tenants who are living in a home with an eye towards owning it are incented to take better care of a property which may become theirs. It’s common for them to pay rent in a timelier manner, and even to pay for minor improvements themselves.
Sellers considering the lease option route do have to consider the disadvantages as well. They will still bear the responsibility of managing the property and paying the mortgage, property taxes and maintenance during the lease portion of the contract. A tenant-buyer also has a certain amount a power over the title of the property since once a lease option agreement is reached, the home cannot be sold to anyone else during the term. And of course should the lease option tenant-buyer decide at the end not to buy the home, the seller is back to Square One.
A lease option can benefit both the landlord-seller and the tenant-buyer provided that there is clear communication and a professionally written agreement between the two. It’s important to remember that a lease option agreement is a binding contract and should be drafted with the help of an experienced real estate attorney. Contact me anytime if you would like to further discuss using a lease option to market your Capital area home.
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