If considering a contract for lease and purchase or a rent to own, CONSULT AND ATTORNEY.
In the state of Florida agents are not permitted to write lease option contracts.
Q: What is a lease option/Rent to Own?
A: A lease option, rent to own, which is also a contract for lease and purchase is the correct term.
Q: How does it work?
A: The buyer and seller enter into two contacts.
The first contract is a lease (regular rental agreement). The tenant agrees to pay monthly payments for the right to reside in the home.
The second contract is a contract for sale and purchase of the said property.
Q: What is the advantage to the Buyer/Tenant
A: The Tenant is able to occupy the home and treat the property as their home, then may do repairs and improvements at will.
Q: What is the advantage to the seller/landlord?
A: The tenant/buyer has taken physical ownership of the property and under takes to do all the repairs as if the home were theirs. Plus he has a potential future buyer, and a lump sum of cash in hand.
Q: How much funds is required to move into a lease option?
A: There is usually a non- refundable deposit made to enter into a lease option which can run into several thousands of dollars. The tenant/buyer is still required to make monthly payments which are rental payments.
Q: Is not my rent my mortgage payments?
A: NO it is not. A portion may be part of your down payment, but this is a nominal amount.
Q: Who determines how much of my rental payment goes towards my purchase price?
A: The seller/landlord. But it is subject to negotiations.
Q: Do I buy the house at today's market value?
A: It is possible but highly unlikely. The price is usually higher.
Q: Why would the price be higher?
A: The Sale price is negotiate with the thought of the tenant/buyer purchasing a home a year, two years or even as much as five years into the future. The landlord hopes their home will increase in value and they speculate what that price will be. That is the price you contract for. Again the purchase price is subject to negotiation at the time of writing the contract not later.
Q: What happens if I loose my income in someway do I get a credit?
A: If you loose your income and you are unable to pay your rent you could face eviction. That is the first contract you entered into. If you are evicted tenant losses their non-refundable deposit for the lease option purchase and any credits given on a monthly basis.
Q: I am ready to buy but the house is not worth the contract price?
A: That is a disadvantage to the buyer/tenant. If the seller landlord is unwilling to renegotiate the contract that is it. Tenant/buyer has to come up with the difference in price out of pocket.
Q: I am ready to buy and the house is worth more than the contract price.
A: This is an advantage to the buyer because the contract for sale and purchase has been locked in at the time all parties signed.
Q: What happens is the landlord/seller wants to sell to another person instead of me?
A: The Landlord seller is bound by the contract for sale and purchase all parties signed. The home can not be sold to a third party unless the buyer of the lease option states in writing they are not going to exercise the option.
Q: I changed my mind, I don't want to live here any more, I want to move.
A: yes you can move but you are first subject to a lease for a specific period of time. If you break the lease you could face legal problems. You could also loose your deposit and any credit given on a monthly basis.
As with any contract everything is subject to negotiations.
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