First time home buyers and real estate investors alike, can benefit greatly from a lease with option to buy on homes. When you purchase lease with option to buy homes you are basically renting/leasing the home. The addition is a locked in option to purchase the home at a certain price. Usually this includes a first rights of refusal clause which means you get to buy the home at the predetermined price before anyone else’s offer can be considered. Often a lease with option to buy contract is created in order to allow home owners who are moving, time to sell a previous home in order to have cash for the down payment.
Write a lease with option to buy into your offer on any home in the market: One way to buy lease with option to buy homes is simply to include that in an offer on any home on the market. Generally speaking you have to pay a few hundred more in rent than the owner pays in the mortgage. This gives the owner financial incentive to take the home off the market. Any home can become a lease with option to buy home with the right offer.
Agree on the purchase price for the home: Even though you are looking to purchase a home in a lease with option to buy contract, you can still negotiate for a good price on the home. If the owner doesn’t like the offer, they will let you know. Get a good price on the home since that will be your locked in price even if real estate values drop. The home owner can simply refuse to sell it if you don’t meet the purchase price.
Decide on the length of terms: This should be the maximum amount of time you want to maintain this option to buy. You can always get out of a lease in the future if need be by helping your lessor find a new tenant which automatically releases you from the lease. But you do not want your lease option to run out before you have the cash for the down payment.
Ask an experienced realtor or real estate lawyer to draw up the contract: You want to be sure the contract is legally binding and looks out for your interests. You can certainly write a lease with option to buy contract yourself using forms you can find for free on the internet. However, when you do this you need to know the legal risks you are taking on by doing so.
Treat the relationship as a lease until you exercise your option: When you are ready to exercise your option, ask your realtor to finalize it in writing. There is no reason not to have a realtor on the buying side since the seller will pay their commission and the help a professional realtor can offer with legal contracts is worth their pay. Statistically speaking realtors save you more money when buying than their fee on simple price negotiation. Once you exercise your option be sure to follow normal best practices including a full inspection and professional assessment before closing on the home.
A benefit of lease with option to buy, is you can try the home on for size, and let the option expire if you change your mind.
Be sure the contract includes a severability clause in case any paragraph has a small error.
If you are a first time home buyer, research federal grants and loan options that may reduce the cost of the home.
Don’t lock into a price that is higher than the asking price, simply because the owner presses for it.