Home Buying in Oakland>Question Details

Gregy, Home Buyer in Oakland, CA

How does a lease with the option to buy work?

Asked by Gregy, Oakland, CA Sat Dec 1, 2007

We consider to rent a condo in Oakland or Emeryville, CA, but I have seen rent with option to buy ads. How does it work? Are we expected to put down a down payment? Is the option reversible? Is it a financially viable strategy?

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Make sure your agent has experience in lease options. You must complete a lease option agreement along with the purchase agreement. It can be negotiated in many ways. Good Luck!
0 votes Thank Flag Link Sat Dec 15, 2007
You have several questions here. There is sometimes misunderstandings help by owner and renter on this subject. There are two classifications. One is the Rent-to-own, which means that the renter will be primarily a renter, with an option to purchase the property at the end of a stated period, at a stated price and within a stated period of time. Usually, the property owner will require a down payment or some funds to negotiate this transaction, very much like a deposit on a rental. The second type of transaction is a Purchase-lease agreement, which is actually a purchase with a deferred closing, which means that the buyer does not have the total funds to close at the present time but expects them in the future (either from a sale of property or from a settlement of some kind) and the buyer needs a 'delayed' closing, and in the meantime, puts down a down payment, agreed to by the parties, and rents until the closing date of the transaction, i.e. when the funds to purchase are available for this purpose. There is a specific time line in the contract and sometimes penalties if the contract is not fulfilled. Either strategies may be good stragefies for a buyer, but sometimes not good strategies for sellers who are at greater risk of having a deal that is not consumated, and a lot of possible legal problems in the future. Caution and the services of a good realty professional and attorney is recommended.
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0 votes Thank Flag Link Sun Dec 2, 2007
A lease-option contract provides for lease of the property with the right to purchase the property during or upon expiration of the lease.

With the Lease Option, only the rent over and above market rent for the area may be applied toward the cash investment.

When optionee pays only market rent, often the optionor will require non refundable "option" money over and above the monthly rental at signing of the lease.

Often the option money can be applied toward the down payment of the optionee exercises their option to purchase.

Best of luck
0 votes Thank Flag Link Sun Dec 2, 2007
In a lease with the option to buy, a landlord agrees to give the renter an exclusive option to purchase the property. The price is usually determined at the outset, but not always, and the agreement states when the purchase should take place (for ex: six months, or a year or two) Part of the rent is used to make the future down payment. Most lenders will accept the down payment if the rental payments exceed the market rent and a valid lease-purchase agreement is in effect. Make sure to have an attorney read the contract before you sign it. Especially if there is anything questionable on the contract.

Hope this helps! :) Deidra Licata-Coldwell Banker (805) 746-1978
0 votes Thank Flag Link Sat Dec 1, 2007
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