LEASE OPTIONS AND LEASE PURCHASE SALES COMPARED

The purpose of this article is to make a comparison between lease options and lease purchase sales. It is imperative that you must be able to clearly separate the two from each other, especially if you are planning to go into the real estate sector of the American economy.

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BASICS OF AN OPTION

 

The following are the basics that you find in an option

 

  • The buyer pays option money to the seller in order to exercise the right to later purchase the property in the future.
  • The seller and buyer will agree to a purchase price, or there may be an agreement to pay the market price at the time of entering into the lease agreement. It is very negotiable, and most often, the practice is that most buyer will want to agree on the purchase price at the beginning of the agreement.
  • The terms and conditions of the agreement are negotiable, while the usual duration of the agreement ranges from one year to three years.
  • Option money paid is not normally refundable.
  • The practice is that the item of the agreement cannot be offered or not available for sales throughout the period of the option, to any third party except the buyer to the agreement.
  • The buyer can sell the option to someone else.
  • If the buyer fails to exercise the option and fails to buy the property at the end of the option, then the option expires.
  • The buyer is not under any obligation to buy the property.

 

BASICS OF LEASE OPTION

 

The following are the basics that you need to know concerning lease option.

 

  • The buyer pays the seller option money signifying his intention to exercise the right to later purchase the property. The lease option money may, however, be substantial, depending on what is mutually agreed upon.
  • The buyer and seller may agree to a definite purchase price immediately or the buyer will agree to pay a market at the time the option will be exercised. This is however negotiable. In most cases, the seller will prefer to take into consideration in the agreement the future price of the property at inception.
  • During the terms of the lease option, the buyer may in his own option agrees to lease the property from the seller at a predetermined rental amount on a weekly or monthly basis as the case maybe.
  • Option money paid in this regard does not normally count as part of the down payment.

 

BASICS OF LEASE PURCHASE


These are the following basic ingredients of lease purchase agreement which you are to know:

 

 

  • The buyer kick starts the lease agreement by making payment for the option to the seller signifying his intention to later purchase the property in the future. This may, however, be a substantial payment.
  • An agreement is reached between the seller and buyer on the purchase price. The purchase price may be at or a bit higher than the market value.
  • During the duration of the lease agreement, the buyer agrees to lease the property from the seller for a pre-determined periodic rental amount.
  • The term of the lease purchase agreement is negotiable, its duration is however of the commonly accepted period of between one and three years. During this time, the buyer will apply to a bank for financing assistance. If approved and granted, the Bank will pay the seller in full and then, buyer begins to make the monthly rental payment.
  • The option money paid is generally not applied to the down payment
  • There is a portion of the monthly lease rental payment that is applied towards the purchase.
  • The option money paid is not refundable, even when there is a default on the part of the buyer.

 

The above is very important for you to get familiar with in this very important aspect of Real Estate transactions.