There is considerable misunderstanding of the concept of a lease with an option to buy. People seem to think you can just rent a place and then buy it later any time you want. You can actually lease a property and buyer it later, but there is more to it than that. First, you have to offer some “option money”. Option money is usually $10,000 to $20,000 held in an escrow account. The amount of time is usually one year. At the end of the year, if the renter/buyer decides buy the property, the option money becomes part of the down payment. When the renter/buyer decides to buy the property it is said that he/she has decided to “exercise” his/her option. If the renter/buyer decides not to buy the property, then he/she forfeits all of the option money to the seller/landlord. In addition to the option money there is monthly leaserent. What happens to the leaserent is a matter of negotiation. All of it can go to the seller/landlord, or buyer and seller may agree that a portion, or even all, of the leaserent will also go toward the down payment. That is if the buyer decides to exercise his/her option. If the buyer doesn’t exercise his/her option, then all of the lease rent remains with the seller/landlord.
Lease with Option to Buy
