Usually part of the rent is applied toward the purchase of the home. A lease agreement would define the terms of the rent and an agreement of sale would define the terms of the sale

Tue May 13 2008, 19:45

The truth is, there is absolutely no difference between a Lease 2 Purchase, a Lease Option or a rent-to own. A few people say there is, but they are wrong. Here's why...
When an experienced real estate professional talks about a Lease 2 Purchase, a lease option or a rent-to-own agreement, they are really talking about an arrangement that contains both a lease contract and an option to purchase contract. By definition, this is really a Lease 2 Purchase (or lease option or rent-to-own). Thus... Lease + Option to Purchase = Lease 2 Purchase AND lease option AND rent-to-own
They're all exactly the same! Don't let anyone tell you otherwise.

Tue May 13 2008, 19:37

A lease purchase is a completely negotiated contract with an extended closing date and immediate posession with a monthly rent owed.

Tue May 13 2008, 19:34

Typically the loan will show up on a credit report as “settled
for less then the full balance”. This will have a negative impact on the borrowers score,
however it will be less then if it shows as “foreclosure”. How much it will actually affect
the score will depend on the rest of the borrowers credit history. It is always best to have
an attorney negotiate a short sale with a lender and at the same time have them negotiate
how it will appear on the credit report. Some lenders will agree to show the loan as “paid
with no late payments” (providing the borrower hasn’t made any) or they may show it as
“paid was 30” if there have been some late payments. This would be optimal.A short sale can also have a negative affect on a borrowers credit if the lender issues a
deficiency judgment. A lender may take this route even if they show the actual mortgage
on the credit report as paid as agreed. When they take the short sale there is still a
difference between the actual mortgage balance and the amount of the short sale. The
lender can then issue what is called a deficiency judgment against the borrower and this
will show on a credit report just as any other judgment would. The attorney should
attempt to get the lender to accept “payment in full without pursuit of any deficiency judgment.” Sometimes the lender will put the borrower on a payment plan for the
deficiency without issuing a judgment. Again, this would be optimal.
The one instance where a lender will not consider a short sale is if the borrower is in
bankruptcy. Lenders consider a short sale payoff as a collection activity and collection
activities are prohibited once a person has filed bankruptcy.

Tue May 13 2008, 19:29

Creativity is in style and a lease option is certainly one consideration. Here are a few tips:

In a declining market a lease with the option to buy is to the benefit of the seller. Inversely, an appreciating market would most likely benefit the buyer. With a lease option you negotiate the purchase up front rather than negotiate the purchase at the end of the lease period. Therefore, in a declining market your home could very well be worth even less than it does right now further reducing your equity position.

Example: The homes in a desired neighborhood are currently selling for $100 per square foot. You agree to lease a home for a pre-determined amount per month for two years (could be any length of time but try to keep it within a two year period due to market flocculation). As part of the lease option agreement the buyer agrees to pay an "option fee" up front that would become non-refundable in the event the buyer does not exercise his option to purchase the home at the agreed upon purchase price at the end of the two year period. This promotes the enthusiasm to complete the sale or the buyer could lose his option fee.

There are two sides to this coin. The buyer locks in at today's market value of (example) $100 per square foot rather than a potential value of $80 per square foot two years from now. In a rising market it would not make sense for a seller to negotiate a purchase price now when the market values are increasing. Why negotiate a purchase price of $100 per square foot now when your home could be worth $120 per square foot two years from now? Or if you are the buyer and a seller is willing to do this, better for the buyer.

Recap -
1. Negotiate the lease payment for a determined period of time with a fully executed lease agreement.
2. Negotiate a satisfactory "lease option fee" up front with the understanding that it could be forfeited in the event the buyer does not purchase the property. The seller must deposit this option fee in a trust type
account or an account separate from all others as to not comingle the funds with their own. The
option fee will be applied towards the buyer's purchase of the home if and when they elect to
complete the sale and must be held in safe keeping by you until that time. The seller may only keep
the option fee if the terms of the purchase agreement are not met at the end of the option period.
3. Negotiate a purchase price the buyer will eventually pay for the property up front at lease signing.

Be sure to consult an attorney or CPA prior to mutual agreement. Have all of these terms in writing, fully understood and signed by all parties. Be sure that all parties retain a fully executed copy so that there are no questions when the lease option period has ended and escrow is opened. There are many other methods of negotiating a lease/option but I have addressed the bulk of it. Good luck.

Mon May 5 2008, 21:55

A quick summary of lease to own means you're leasing a home with an option to purchase it at the end of the lease. Depending on the specific terms of the lease, you typically put a bigger deposit up to start the lease but it goes towards your down payment on the purchase at the end of the lease. There are several different terms used for these deals. Sometimes a certain portion of your monthly lease payments are also applied to your down payment on the purchase of the home. If you would like more detail feel free to contact me.

Jimmy Hutchinson
Atmosphere Realty
310-350-4280

Mon May 5 2008, 21:00