Lease-Option Details:


Terms:

  • A lease option is an agreement that gives a renter a choice to purchase the rented property, for a non-refundable fee, called an option fee, during or at the end of the rental period. The option fee is paid at the signing of the agreement.
  • The term of the lease is typically about 3 years, but may be shorter or longer, if agreed between the parties.
  • A lease option also precludes the owner from offering the property for sale to anyone else.
  • A rent credit, some amount above the standard monthly rental amount, is collected and applied toward toward the purchase price at the time of purchase, like the option fee.
  • The tenant-buyer is responsible for all maintenance, repairs, taxes and HOA fees during occupancy.
  • The owners pays the taxes.
  • A lease option gives a potential buyer more flexibility than a standard lease-purchase agreement
  • The price of the home is set upfront, which permits the renter to buy the home in the future at today's price. 
  • For that option, the renter is charged an upfront fee by the owner (option fee). 
  • The option fee goes toward the down payment if the renter decides to buy the home at the end of the lease.   
  • Option fees are rent credits are non-refundable.


The lease option is especially helpful to


  1. Those who may need the flexibility a lease offers, if they are forced to move due to work or other factors, and aren't prepared to commit to a purchase.
  2. Investors who believe the capital gains justify the added option cost and appreciate the rent credit towards the purchase price
  3. Those who might be building or rebuilding their credit
  4. Those who don't have enough saved for a 20% down payment.
  5. Those who wish to own, but have a recent bankruptcy or other credit problems.
  6. Those who wish to own, but don't want to buy outright.


Tenants pay more to rent with a lease-option than they may pay otherwise, in part because the owner is holding the price at current market value and a rent credit is being applied to the down payment on the sale.


Rental Payments

The owner charges a "premium," or rent credit, in addition to the standard monthly rent for the option to buy (at today's price) when the lease ends. The premium might be 10%-20% of the standard monthly rent. The rent credit becomes part of the down payment for the home if the option is exercised to buy the home at the end of the lease. However, like the option payment, the renter forfeits the extra money paid above the standard rent if the home is not purchased at the end of the lease.


The Term of the Lease Option for 230 Delaware Drive


  • Purchase price:  $429,900.
  • Term of Lease: 3 years (negotiable).
  • Rent:  $2,900/month with a $400 rent credit.
  • Option Fee:  $50,000 + 2% of purchase price (Due upon signing of the Agreement).
  • Exercise period:  60 days (Tenant-Buyer must notify Owner of option to exercise the option to purchase 60 days before doing so or 60 days before the expiration of the term.  Default and termination provisions apply).
  • Extensions offered at Tenant-Buyer request and at Owner discretion: $10,000.
  • The option fee, rent credits and extension fees are non-refundable.
  • The option fee and rent credit will be applied toward the purchase price.
  • Rent is due through the end of the month of the closing date.