Wondering what lease purchase agreements are?
In this blog post, we’ll be discussing all you need to know about the subject.
What’s a Lease Purchase Agreement?
A lease purchase agreement is an agreement between the tenant and the landlord, in which the landlord gives the renter an option to buy the property in the near future.
Also called “Lease Purchase Contract,” this agreement is heart of the rent-to-own properties.
The nature of such agreements and transactions may vary because all the terms of this contract are negotiable.
For instance, it’s not mandatory to include a set price.
This means that both the parties need to sit down with each other and decide the terms all by themselves.
What’s in it for the Tenants?
For tenants, this agreement can help:
- Resolve credit problems, helping them qualify for a traditional mortgage.
- Save time to save up for down payment, assuring that they won’t lose the house.
- To recover the costs, they invested in the property repairs and improvements in the form of down payments or against the purchase price.
- To avoid going through the trouble of moving out again.
What’s in it for the Home-Sellers?
Here’s what in it for the home-sellers:
- Ability to quote a reasonable price for the home in advance
- Assurance that the tenant will keep the house in good condition, as he/she might, in the near future, decide to purchase the home
- Offering this option helps home-sellers attract quality and responsible tenants who are highly interested in creating a long-term relationship.
- Up-front payment increases the ROI. In case the tenants don’t buy the house, the homeowners have the right to keep this payment.
Here’s How it Works
Homeowners require the tenants to provide them with a non-refundable payment, while signing the agreement, to give them exclusive rights to purchase the property in the near future.
It’s referred to as “Option Payment.” And the amount can be just anything.
It’s highly-advantageous for the tenants because it will give them the exclusive rights to purchase the property in the near future, despite the seller having a change of heart.
Alongside this, the lease purchase agreement comprises of the down payment size and timetable.
If both the parties are okay with it, they can agree on a specific portion of rents being paid towards the down payment.
But this means that the tenants will have to pay extra rent each month.
If the renters decide not to purchase the home in the future, this money is usually forfeited and is kept by the homeowner.
So, basically, it depends on both the buyers and sellers.
The lease portion lasts for about 1-3 years, and the tenants hold the right to purchase the property anytime they want during their lease period. What this means is buyers can’t sell the home to someone else.
These agreements aren’t regulated or standardized.
It’s important for the renters to know all the concept’s ins and outs and educate themselves with the contract’s specifics concerning how to purchase the home and the timely rent payments.
Before both parties sign the lease-purchase agreement, I’d advise them to review it with their respective attorneys to avoid any complications in the near future.
These agreements are a perfect solution for homeowners stuck with their houses that aren’t being sold or are required to relocate to another place.
It’s even a great option for real estate investors and helps them get a good price on their investments.
It’s a great option for buyers with low credit scores and who aren’t able to get a down payment together within a short period of time.
Whether you are a home buyer or seller in Jacksonville, the lease purchase agreement might be just what you need depending on your individual circumstances.
And we, at BuyingJaxHomes, would love nothing more than helping you out with it.
Feel free to get in touch with us to know more and learn how we can help.