A lease option is a sale document usually used in sale and purchase of property. They have become common substitutes for mortgage documents. It is normally outlined in this document that the lessee will eventually buy the property that they are currently leasing or renting, but they are under no obligation to do so. Out of the lease option have there come other arrangements of buying and selling property which are slowly but surely replacing the mortgage option. These are the options of purchase and lease purchase agreements.
A lease option can only be considered as such under conditions that are clearly spelt out in the document;
1. The buyer must show commitment to the lease option by paying some substantial amount of money to the seller when the agreement is being arrived at. Normally, the amount to be paid is not stipulated, but the two parties have to agree on how much it will be. This amount however, is not treated as part of the down payment for the property. It is just a commitment fee.
2. The two parties must agree on the selling price. This allows the buyer time to sort himself out financially and see whether he will be prepared to pay the given amount when the time comes for the lease option to mature. If the price of the property is not agreed upon immediately, the buyer must be prepared to buy the property at the market value that will be prevailing when the lease option matures.
3. The maturity date of the lease option must be specified. In most cases, the term goes for between one and three years. The term plays a crucial role in making the seller aware that he may not enter into another lease contract with another buyer during the term of the option. However, as for the buyer, he may sell the option to another person if he so wishes.
4. During the lease period, the buyer pays the seller an agreed upon amount of money per month, otherwise known as rent.
The buyer is normally under no obligation to purchase the property and if he does not honor the agreement at the end of the option term, the seller can get into an agreement with another buyer. However, the previous buyer should be warned that the lease money he paid initially is normally not refundable.
When getting into a lease agreement, it is always advisable to hire a real estate lawyer who will explain your rights and obligations towards the lease agreement. Other things that you should adhere to are;
1. Make sure that the property gets inspected to ensure that it is in the right condition even before you lease it out, leave alone buy it.
2. Carefully look at the title policy to see that you will have no problems changing the name of the owner when you finally buy the property.
3. Examine the seller terms and conditions and other disclosures contained therein.
Peter Gitundu Creates Interesting And Thought Provoking Content on Real Estate. For More Information, Read More Of His Articles Here LEASE OPTIONS If You Enjoyed This Article, Make Sure You Read My Most Recent Posts Here LEASE OPTIONS
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