Is Lease/Purchase a good option?

I had two calls this morning asking about purchasing a home via lease/purchase. It seems that one of my closed listings (that was never a candidate for lease/purchase) was just posted on a lease/purchase web site. It's a subject I haven't had to speak to in the last year or so, so I thought I'd write down my thoughts about the process. 

First, about the process. There are two contracts. The first is a lease agreement, similar to any lease you may have signed in the past. The lease terms are negotiable, as is the security deposit. But, if the seller is going to postpone selling their home for a fixed period of time, they may ask for higher rent, a larger security deposit, and some form downpayment that may be non-refundable if you can't close the purchase. And the landlord will likely hold you responsible for all repairs needed to the property during the lease term. The second contract is a purchase contract that sets a future price for the property.  

Here's the problem. In the current hot real estate market, sellers that have priced their property well can sell it this week, often at higher than list price. Why would they agree to wait to get their money? A dollar today is worth more than a dollar tomorrow.

Often, the homes listed as lease purchase properties are overpriced or in need of repairs and renovation. They aren't the best properties on the market. Why would you want to choose between a couple of less desirable properties instead of having the pick of the best available in your price range? And pay a premium for that privilege?

There are better ways. If your credit score is the problem, fix it. You have to have that under control before you could close a lease purchase contract anyway. If you don't have enough cash on hand, save up. You need at least 3.5% of the cost of the home you want to purchase for a down payment, then you'll need money for closing costs, appraisals, inspections, and moving costs. If you rent a home that you love, ask for a right of first refusal to purchase if the landlord puts the home on the market.

I know it's going to take some time, and it will require patience and commitment to the process. But buying a home is the biggest investment you will ever make. Take your time and do it right so that you'll love your home and reap the rewards of your investment.