One alternative way to purchase a home is via lease option. Sometimes referred as lease with option to purchase (lease option). Basically, the seller agrees to lease and sell a property to an end buyer based on purchase date and sales price agreement in the future.
There are two agreements in a lease option. First, a lease agreement (rental agreement) stating customary terms, monthly rent, and ending period. Second, includes a residential purchase agreement stating the agreed purchase price and option purchase date. Per agreed time period on the lease agreement, the buyer has the option to either terminate the rental agreement and purchase(option) the home or decide not to purchase the home.
This benefits the seller because they have a tenant/buyer in the property paying rent and maintaining the property. Sellers typically receive an option deposit upfront, as consideration for renting and selling the property to the buyer. Often the rent is a little higher than typical rent. Seller waits until the buyer is ready to exercise their option to purchase per agreement. Since the buyer is purchasing the property, repairs are usually completed by the tenant/buyer.
This benefits the buyer because they do not have to move after they exercise their option to purchase and allow them to improve their credit and qualify for a mortgage. The price is agreed ahead of time in the residential purchase agreement. If they do not like the home, they have the option to not purchase the property at the end of the lease agreeement. If they decide not to purchase however, the original option deposit is not returned to the buyer.
Lease option/purchase strategy has some variation but the process is fairly uniform. This might be a good fit for a buyer who needs time to clean up their credit to obtain a loan. Sellers need to vet their potential buyer, contact a lender to make sure the buyer is able to qualify for a loan, verify employment, rental payment history, etc. to better screen qualified buyers. Santa Maria/Orcutt real estate offers this option as sellers choose to sell their homes in this manner and gives buyers another way to purchase a home.
Lease agreement typically run 2 - 4 years, or sooner if the buyer is able to qualify sooner. The terms are flexible, including extensions or amended agreements if needed. Seeking the advice of a qualify real estate professional familar with agreements and lease option helps with a successful closing.