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2011-03-02 15:19:33

Why Lease Options are a Great Option for this Market

As discussed in my last article, selling and buying homes with a Contract for Deed is a fantastic opportunity for both Home Sellers and Home Buyers in this Real Estate Market.  Another option, which achieves very similar results, is the Lease Option Agreement.  With a Lease Option Agreement, Home Sellers are once again able to get what they need for their property, so as to avoid selling into a down market, and Home Buyers who may not be able to get a conventional loan to buy a home, are awarded many of the benefits of home ownership through the agreement. 

In simple terms, a Lease Option is real estate contract that has a lease agreement, with an appended option to purchase.  Through this contract the tenant/buyer pays for an option to purchase the property within, or at the end of the lease term at a pre-determined sales price.  Typically , when the tenant/buyer pays in full and on time, they will be awarded a rental credit, which can then be used at the time of purchase to go towards their downpayment or closing costs.  This is an excellent savings plan for the tenant/buyer, since they will only need to come up with a fraction of the cash needed to purchase the home.   Plus, the tenant/buyer will be living in the home that they plan to purchase, eliminating their need to move and providing a stable environment for them and their families.

Typically, Lease Option contracts are longer than traditional Lease Agreements.  The Home Seller benefits from this in 2 ways: they have a long term tenant in place who may buy – reducing tenant turn over, and they are able to allow the property to appreciate over time so that they can get a higher sales price than current market value.  The Tenant/Buyer also benefits from this in that the longer the contract, the more time they have to prepare to get a conventional loan, and to accrue rental credits which will reduce the amount of money that they need to come to the table with at Settlement and Closing. 

Another benefit to the Landlord/Seller is that the tenant/buyer usually is required to maintain the property through the term – eliminating maintenance expenses and responsibilities on their part.  They also will not have to pay any Real Estate Commissions or Fees when/if the home sells to the tenant/buyer, since the buyer is already in place.  Combined with no vacancies, these factors have the potential to save Landlord/Seller tens of thousands of dollars through the course of the transaction. 

In order to execute a Lease Option Agreement, the Seller will need to have the appropriate paperwork drafted by an attorney, and then market the property to find a buyer.  Or, if the Seller prefers, they could work with a Realtor to draft the paperwork, and market the property.  Another alternative for a Seller would to be to work with a local Real Estate Company that specializes in this type of transaction.  One example of this type of company is, which currently focuses in the Washington DC metro area, but is expanding Nationwide. 

For Additional Information on Contract For Deed and Lease Options, please visit my website at

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