10 — Say you saw it in The Real Estate Browser of Lynchburg — Volume 8 Number 14 www.LynchburgRealEstateBrowser.com Keeping Your Options Open by Dan Vollmer, Associate Broker, ReMax 1st Olympic Awhile back I had a con- versation with a business col- league, who asked me about the rise of homes offering ‘Lease Purchase’ options. He said “I’m seeing this more and more - why is that… and how does that even work?” it. The tenant has an OPTION to buy first. If they Which is a great question (okay, technically its TWO great questions). First off, why are more and more home owners/sellers offering this option? I believe there are a couple of factors: a purchase agreement detailing the sales price and Some people bought a new house, moved into it and listed their previous home for sale. Most people can’t swing two mortgage payments for very long, so they opted to rent the old house when it didn’t sell. Now they find themselves in this never- ending spiral - they want to sell, but have to keep renters in it if it doesn’t. How do you turn into that skid? You offer the lease purchase option to your tenants or to prospective buyers. and pays the seller rent money. So the property is Other sellers may just want to cast as wide a net as possible, and offering a buyer the lease purchase option allows those buyers who don’t qualify for a mortgage now - but hopefully will in the near future - the ability to buy the house they want, just with a deferred closing date. property. In other words, if a property would typi- choose not to exercise that option, then the seller is free to market the property for sale to the general public. Lease PURCHASE: here, the buyer and seller come to terms on the sale of the property, they sign various other details. The difference here is that the closing date is set for a year, sometimes longer, in the future. And in the interim, the buyer moves in being used as a rental, but occupied by the eventual buyer - who is under contract. A logical follow up question under the lease purchase agreement is this: does the rent paid go towards the purchase price? In some cases, it may - if the monthly amount paid by the buyer is over and above the market rental rate for a similar cally rent for $750, but the buyer is paying $1000/ month, that extra $250 can be applied towards the eventual purchase. Of course, there are many other variable and Now, how does a Lease Purchase work? Technically, there are two different options, and there are distinct differences. details to agreements such as these - and they can Lease OPTION: under this scenario the prop- erty is basically rented out to a tenant. The owner maintains ownership, the tenant pays rent, and its very much a rental property. The key here is that if the owner ever decides they want to sell, they have agreed up front to give the tenant the first shot at to sell a property. For some, however, being willing be quite complex. Which is one reason most sellers find them to be less than ideal options when trying to consider these scenarios may be what attracts the perfect buyer for that home. Questions, comments, or have an idea for a future article? Email me at dan@DanVollmer.com.