We Just Started a Lease Purchase Deal for One of Our Listings

We Just Started a Lease Purchase Deal for One of Our Listings

We just completed the signing of a Lease with Option to Purchase transaction this week on one of our listings.  There are pros and cons to these types of transactions.  Let's start with the pro's.

1. The Lease with Option To Purchase is good for the tenant/buyer, because he or she can get into a property they like immediately while coming up with the cash and/or financing to complete the purchase of the property. 
2. The Lease with Option To Purchase is good for the seller, because he or she receives more money than they would from a normal purchase and sale transaction.  The Option Agreement specifies an amount that the tenant/buyer agrees to pay upfront which is non refundale that goes directly to the seller.
3. The Lease with Option to Purchase is good for the tenant/buyer also because the tenant/buyer can negotiate to have a portion of the monthly rent applied towards the close of the transaction.  As long as the tenant/buyer makes the monthly rent payments in a timely manner and follows through with the closing, the portion of the rent that goes toward the transaction is like putting money into the bank.

Now here are some Con's.

1. The transaction may not close.  Statistics show that between one in three and one in four Lease with Option to Purchase transactions actually close.  That is a low ratio. Agents have to do everything possible to work with the buyer and seller to close the deal.  Otherwise we may miss out on our commission.
2. The tenant/buyer may not be able to get financing.  Perhaps the tenant/buyer does something to reduce their credit score while in the process of leasing the home.  It happens unfortnately.
3. The tenant/buyer does not follow through on the transaction meaning they  forfeit their Option Funds to the seller automatically.  But the seller has a property that has to go back on the market.

All parties should really exam a Lease with Option to Purchase deal before going into it.  Everyone needs to work together to get this deal done.  And who knows what can happen in a year's time.

For more information about buying and selling in the metro ATL, call us at 404 418 8092 ext 2.