Lease-Purchase vs. Lease-Option - what's the difference?
Hello!
We have been asked a lot recently what the difference is between a "lease-purchase" and a "lease-option", or "lease with option to purchase". Here's a break down of the two:
LEASE-PURCHASE:
Lease-purchase has 2 simultaneous contracts completed - a lease agreement, as well as a purchase agreement, that are tied together. The tenant/buyer agrees to lease said property for a set amount of time, and purchase it on a specific date (or sooner). Escrow is opened; should the tenant/buyer default on the lease, they also default on the purchase aspect, and the landlord/seller may keep all deposits, escrows, and rent monies.
Lease-purchases are a great way for buyers with a home to sell to get into their new home, wait for the old one to sell, and THEN qualify for a new mortgage/close on the new home. It also helps sellers who have a vacant home for sale; they can recoup some if not all of their mortgage payments, while having tenants in the home that intend to purchase it - obviously, they are much more likely than the average tenant to take REALLY good care of the home!
LEASE-OPTION:
Lease with a purchase option essentially gives the lessee the 'first shot' at purchasing the home, should the lessor decide to sell it. They complete a lease agreement, and attach an "Option Agreement" to the lease. The lessee pays an "Option" - a down payment for the rights to puchase the home. Should the lessee complete the sale, the Option money is credited to them at close of escrow. Should the lessee NOT exercise the Option to purchase, the landlord keeps the Option money.
Lease-Option works for renters who like their rental home, but either want to "test drive" the home, community, or other facet of the location. It's also a great way for the lessees to improve their credit if needed to qualify for a mortgage.
There are a number of suggestions we have for both of the above situations; as always, we aim to fully-protect and advise our clients of the pros and cons of EVERY transaction. If you would like assistance in a Lease-Purchase or Lease-Option, please contact us at info@WeAreAZRealEstate.com.
Sharon Kotula, ABR
Adam Tarr, e-PRO
Your Phoenix Area Real Estate Source
RE/MAX Excalibur
Scottsdale, AZ
480-483-3333