Lease / Option
In Cary NC where we expect our real estate market to rebound sooner than other parts of the county, a lease-to-own plan can be an ideal solution for both sellers and buyers. From a seller's perspective, it can tie in a buyer for a property that may not otherwise sell now. For a buyer, it can lock in today's rock bottom prices, yet the buyer does not need to obtain financing for a period of time. Here's how it works:
A lease-option is a simple lease agreement where the buyer/tenant pays rent to live in a property for period of time. The difference is there is an "option" to buy the property at a certain price and within a given timeframe. The option is a deposit that the buyer/tenant pays to lock in price and other terms in exchange for the future purchase of the property. Typically, if the buyer/tenant decides not to purchase the home as agreed, he forfeits some or all of his option or deposit money.
Considerations for both Parties
Like everything, there are pros and cons for both parties to consider. The key is to reach a balance such that both parties feel the advantages outweigh the concerns enough to proceed.
The owner/seller secures a buyer that may otherwise not be able to commit to purchase immediately. He also receives rental income for the period of time prior to the actual sales transaction. However he also becomes a landlord, with all of the responsibilities associated with it.
The buyer/tenant is able to move in and enjoy the property without having to secure financing immediately. He is able to lock in a current price, anticipating the price of the home will actually be greater than if he were to wait and buy at a later time. If however he decides not to buy the home, he loses his option money.
Each contract is unique and in the end the terms are whatever both parties have negotiated. It is advised to have a real estate attorney draft or review the final contract of this type of transaction.