A Lease Option is a contract where a seller agrees to give the buyer the option to purchase a specific property at an agreed upon price. It is also commonly called a Rent to Own Agreement.
The buyer agrees to pay the seller Option Money, which is not refundable in the event that the buyer elects not to exercise the Option.
The term can vary, but it is typically less than three years. While the buyer is not obligated to purchase the property under a Lease Option, the seller may not sell the property to anyone else during this period. When the agreed upon term expires, so does the option.
Each agreement is unique, but typically a portion of each monthly payment will be applied to the purchase price in what is called a rent credit. This rent credit can (but does not always – this decision is up to the lender) be applied towards the down payment.
Lease Options in Massachusetts are a great alternative to traditional financing for those who do not qualify to purchase a home today. It allows the buyer to lock in a price and begin building equity towards purchasing a home.
Selling a Home with a Lease Option or Rent to Own contract also has benefits. The seller can typically sell their home quickly and for full fair market value, regardless of where the market is. It offers advantages over simply renting a home because lease option tenants typically view the home as their own and as such take better care of the home.