Lease Option FAQs
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Lease/Option -or- Rent to Own
Blue Sky PPS helps many New Jersey property owners sell their houses through a lease/option agreement.
Q.1 What is a lease option?
This basically means you are leasing or renting a property with an option to buy it at a future date. The future price of the property should be fixed at the time the lease-option is signed.
Usually there is an up-front payment of some amount to purchase the option. The amount can vary. Sometimes the monthly payment is larger than normal and the excess is used to purchase the option. In some cases, the option money can be applied toward the down payment for the later purchase of the home.
Lease-options are usually done during a slow real estate market. During a hot market, the seller can simply sell the home in the regular manner.
Q.2 What benefits do a lease option hold for the seller?
They often get to sell the house at a higher price than they could sell it in a normal transaction.
They can sell the house during a slow market.
By being able to collect a larger monthly payment than they could obtain in a normal lease, the property “cash-flows” and they don’t have to come up with money out of their own pocket each month to make the mortgage payment.
They get up-front option money and if the buyer cannot exercise the option, they get to keep it.
The tenant has “pride of ownership” and takes better care of your property.
Q.3 How is the contract worded in a “rent with option to buy” situation.
The lease part of the form is pretty straightforward most of the time and is just like any other lease. The option just means that you have an “option” to purchase the home within a specified period of time. It makes sense to specify the option price in the lease/option contract.
Contact us to arrange a free consultation where we will take you through the process and paperwork.
Q.4 How does the lease option benefit the tenant?
A lease option can benefit the tenant in many ways. One reason is that a future purchase price is set that both parties commit to. This could be very beneficial depending on the length of the term and the growth of equity within that term.
A lease option will also use a portion of the payment towards the purchase price in addition to the initial Down Payment, or “Option”. Another benefit is that lenders will use the proof of timely payments to determine the buyers qualification when the time comes to purchase the home.
Q.5 Will I have to do maintenance and repairs?
Our leases state that any maintenance or repairs less than $1000.00 is the tenants responsibility. We wish to reinforce the fact that the tenant is working towards purchasing the property and should be responsible to the property as a future homeowner.
