What are the advantages and disadvantages of a Lease/Purchase Agreement when you are selling your home? There are times when a buyer is unable to proceed with the purchase of a home right away, but they have a plan and they really want to buy your home.
Lease/Purchase or Rent with an Option to Buy. Why should a Seller be cautious about agreeing to one of these open ended agreements?
Rent with an Option can be very good for the Buyer but for the Seller there are other considerations. You are taking your home off the market and renting it with the hope that the tenants will exercise the option to purchase.
The Plusses:
- You can charge an Option Fee that is non-refundable.
- You may agree to allocate a certain percentage of the monthly lease amount toward to Buyers down payment if they do exercise their option to purchase prior to the end of the term. This helps the Buyer save for their purchase while they are living in their chosen home.
- You may actually get more for your home by being flexible, especially at a time when Buyers are having difficulty qualifying for a mortgage.
The Possible Problems:
The Buyers decide that they dont want to purchase for whatever reason. They dont like the neighborhood. They discover problems with the home. After renting your home for a year or two, you may find that repairs are necessary before re-listing it.
Landlord/Tenant Code
Landlord/Tenant Code applies to any lease agreement and you just cant ask renters to leave if it isnt working out:
- Security Deposits must be placed in an escrow account.
- The Landlord must provide a copy of this Summary of Landlord/Tenant Codeto the tenant prior to agreeing verbally or in writing to renting your property.
- Even if the tenant decides not to exercise the option to purchase, all provisions of this Code apply.
My recommendation is always to take every offer seriously and look for ways to make it work. Dont ever try to handle a lease/purchase on your own however. Work with an agent that has experience in this area. We always consult with our Real Estate Attorney and have her draw up the specific Agreement to provide protection for the Seller as well as the Buyer. Its critical that the Buyer consider themselves to be the new owner, or at least the next owner of the home.
There are other creative ways to sell your home. Read all about an Agreement of Sale with Early Occupancy.