What is a lease purchase and how does it work?

 Lease with Option to Purchase

 For sellers a lease with option to purchase can be a viable tool to induce a sale where the buyer lacks sufficient funds for downpayment and closing costs.
  The lessee (Buyer) enters into a contract to lease a home with an option to purchase it. The terms, price and option period (usually one year) are spelled out in the contract. The seller collects upfront money (the option consideration) from the buyer which is non refundable. The option consideration is typically applied toward the purchase price in the event the option to purchase is exercised. Also, lease options generally provide that a portion of the rent is applied toward the purchase if the option is exercised. This is referred to as "rent credit". 
Buyer Advantages to a lease option are:

• Low cash requirement.
• Partial rent credit applied toward downpayment
• Lock-in of purchase price at today's market value.
• Time to plan and prepare for the finance of the purchase.                                                                                

Seller Advantantages to a lease option are:

• Higher than market rent
• Top market sales price for property
• Extra care of the property from the future owner
• Tax free use of the "option consideration" until the option expires or is exercised.
• Continued tax deductions for expenses and depreciation during the option period.    

Ken Rutherford, CRS is a Broker Associate with Coldwell Banker Select. He is an expert in all facets of residental real estate and has been counseling buyers and sellers of residential real estate since 1992. He has earned the coveted CRS designation held by ony 4% of all real estate associates. He lives in Broken Arrow Oklahoma and services all of the greater Tulsa Metropolitan Area.
918-260-9932 ken@kensellshomes.com