In exchange for something of value (consideration) the right given to a party (optionee) by the owner of a property (optionor), to purchase or lease property within a specified time.
The option is a pre-arranged, written agreement between an owner and a prospective buyer that states the right to purchase a property at a fixed price and within a specified time frame.
Because the option will become the sales agreement, all terms should be clearly defined, and spelled-out. A prospective buyer generally pays an option fee in advance to the owner in exchange for the right to exercise the option. How this works locally here, in the case of a "lease-option"; a buyer who perhaps wants to "try-before-you-buy", or who needs more time to raise a down payment, will agree to lease a home for a period of 6 months to a year, while paying rent and usually an option fee. At the end of the term, the buyer then has the ‘option' to purchase the property outright at the price previously agreed.
Often times a portion of the rent paid during the lease term and the option money, are applied to the purchase price. The caveat is this; if the buyer chooses not to exercise the option, he looses the option money and rental fees.
This type of arrangement benefits both buyer and seller because it provides income for the seller, and the buyer locks in a purchase price well in advance of actually purchasing a home. There are downsides of course, such as the property value declining below the agreed upon price. It is another way to acquire real estate when conventional sales just won't do. Try it!
(c) 2007 John Wall. Visit www.TeamResults21.com.
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