A lease with option to buy allows a renter to purchase a home after at least 12 months or more of timely payments made through a checking account to the seller. A buyer usually enters a lease with option to buy with a small down payment and a negotiated purchase price of the home upon the maturity of the lease contract. Sometimes the seller will also credit a monthly portion towards building equity within the home. The bank will treat this as a purchase with prior credits for down payment. It is a win win scenario.
- allows monthly buildup of equity
- allows the buyer time to repair credit for bank financing
- allows the buyer to find another home without purchasing if they exit pior to contract maturity
- allows the buyer to try out the home prior to purchasing
- home is sold faster during a slow market
- the home is usually sold at a higher price than a normal transaction
- upfront cash to seller
- the buyer will have greater interest in upkeep compared to a renter
- option from buyer can pay Realtor's commission upfront
P.S. A buyer should always have their credit reviewed with a bank prior to entering into a lease with option to buy in order to repair any credit issues prior to obtaining financing upon contract maturity.