Creative Realty  and Financing, LLC
Less Stress. Less Worries.

Donna Allison
Acquisition Manager

Today, options to purchase, lease options and lease purchase agreements are three different financing documents. The variances are state specific and not all states have identical laws. Before entering into an agreement with a seller, buyers should obtain the advice of a real estate lawyer. The information below is an overview and is not meant to be construed as legal advice.

·                     Buyer pays the seller option money for the right to later purchase the property.

·                     Buyer and seller may agree to a purchase price now

·         Buyer may agree to pay market value at the time the option is exercised. ·

·         Buyers want to lock in the future purchase price upon inception of the option.

·                     The term of the option agreement is negotiable, but  is generally from one year to three years.

·                     Option money is rarely refundable.

·                     Nobody else can buy the property during the option period.

·                     If the buyer does not exercise the option and purchase the property, the option expires.

·                     The buyer is not obligated to buy the property.

·                     Buyer pays the seller option money for the right to later purchase the property.

·                     Buyer and seller may agree to a purchase price now

·        Buyer may agree to pay market value at the time the option is exercised.

·        Buyers want to lock in the future purchase price upon inception of the lease option.

·                     During the term, the buyer agrees to lease the property from the seller for a predetermined rental amount.

·                     The term of the agreement is negotiable, but the common length is generally from one year to three years.

·                     The option money generally does not apply toward the down payment.

·                     A portion of the monthly rental payment typically applies toward the purchase price.

·                     Option money is rarely refundable.

·                     Nobody else can buy the property during the lease option period.

·                     Buyer does not exercise the option and purchase the property, the option expires.

·                     The buyer is not obligated to buy the property.

·                     Buyer pays the seller option money for the right to later purchase the property.

·                     Buyer and seller agree on a purchase price, often at or a bit higher than market value.

·                     During the term, the buyer agrees to lease the property from the seller for a predetermined rental amount.

·                     The term of the lease is negotiable, but the common length is generally from one year to three years.

·         Buyer can at anytime applies for bank financing and pays the seller in full.

·                     The option money generally does not apply toward the down payment.

·                     A portion of the monthly lease payment typically applies toward the purchase price.

·                     Option money is nonrefundable.

·                     Nobody else can buy the property unless the buyer defaults.

·                     Buyers are often responsible for maintaining the property and paying all expenses associated with its upkeep

·                     The buyer is obligated to buy the property.

Hire a real estate lawyer to draw the documents and explain your rights, including those of possession and default consequences. The property might be encumbered by underlying loans that contain alienation clauses, giving the lender the right to accelerate the loans upon sale.

Sometimes sellers give the option money to their real estate agent as full payment of commission. Agents are not always involved in the exercise of lease options or fulfillment of lease purchase agreements and, even if you have retained real estate agent representation, you still need a real estate lawyer. Agents are not lawyers and cannot give legal advice.

In the event of a lease purchase, obtain all the disclosures and do your due diligence just like you would on a regular sale. This means:

·                     Get a home inspection.

·                     Examine the title policy.

·                     Obtain an appraisal.

·                     Read seller disclosures.

·                     Consider obtaining pest inspections, a roof certification, home warranty plan and hiring other qualified inspectors.

Lease purchase agreements are commonly offered by sellers of hard-to-sell properties. Think about it, if the property was easy to sell, the seller would sell it to a conventional buyer who would pay the seller cash.

·                     Sellers generally get market value at today's prices and relief from paying a mortgage on a vacant property.

·                     Although the lease payments may exceed market rent, the buyer is building a down payment

·        Buyers are banking that the property will appreciate beyond the agreed upon purchase price.

·                     Buyers generally make a small down payment, with little or no qualifying

·        Making a lease purchase an attractive way to ease into the benefits of home ownership.

·                     Part of the lease payment is credited toward the purchase price at the end of the lease option agreement.

·                     If the buyer defaults, sellers do not refund any portion of the lease payments nor the option money

·        If the buyer defaults, sellers may retain the right to sue for specific performance.

For more information, contact a real estate lawyer.

In a lease agreement, there are various provisions and agreements between the lessor and lessee that set out the rights and obligations of each. One of these might be an option for the lessee to renew the lease at the end of the period. The tenant would have the right, upon giving the proper notice, to renew the lease for another period.

Another possible real estate option that a tenant or lessee might have is the lease/purchase option. This option would specify that the tenant has the right to purchase the property at a specified price during the term of the lease. In some of these arrangements, the lessor or landlord may also apply a portion of rental payments to the purchase price or down payment of the property.

This is for Information Purposes Only.