Some Realtors do lease-options. Many don't. The advice from Michael, below, is actually pretty good. Just to address a few of his points, though:
Buyer pays the seller option money for the right to purchase the property in the future. This option money may (should) be substantial.
It's true the option money may be substantial, and the higher it is, the better it is for the seller. But I've done lease-options with no option fee whatsoever. And walk away from any agent who says you need something like 5% or 10%. If you're going to put that much money in, there are other techniques you should be using instead.
The option money generally does not apply toward the down payment and is non-refundable.
Although it's all negotiable, usually the option fee DOES apply to the down payment or purchase price. It's correct that the option fee is usually (almost always) non-refundable. That's because the option fee secures the right to buy the property. Whether or not the tenant-buyer purchases, the option fee HAS bought something of value.
Buyers may be responsible for maintaining the property and paying all expenses associated with its upkeep, including taxes and insurance.
Often, buyers are responsible for some of the maintenance--usually minor maintenance (similar to what's in any lease) as well as--sometimes--something like the first $200 of any major repair. That's negotiable and the tenant-buyer should have a clear understanding in advance what his/her responsibilities are. Where I am, though, tenant-buyers usually aren't responsible for taxes. And as a non-owner, they can't qualify for homeowner's insurance. They should carry the same insurance that any tenant would--renter's insurance. And usually the monthly rent is slightly above what would be charged with a straight rental. So it's often difficult to pile expenses like taxes and insurance on and still have a competitive lease payment.
The term of the agreement is negotiable, but the common length is generally from one year to 36 months, at which time the buyer will apply for bank financing and pays off the seller in full.
A 1 year lease-option is possible, but that's a very, very short time frame. For your protection as a tenant buyer, don't do less than 2 years. Aim for 3 or 4, and try to have a provision in the option agreement allowing you to extend the option (usually for an additional payment) for a year if you so choose.
Hope that helps.
Lease Purchase Basics
â€¢Buyer pays the seller option money for the right to purchase the property in the future. This option money may (should) be substantial.
â€¢Buyer and seller agree on a purchase price, often at or slightly higher than fair market value.
â€¢During the term of the lease, the buyer agrees to rent the property from the seller for a predetermined rental amount.
â€¢The term of the agreement is negotiable, but the common length is generally from one year to 36 months, at which time the buyer will apply for bank financing and pays off the seller in full.
â€¢The option money generally does not apply toward the down payment and is non-refundable.
â€¢A portion of the monthly lease payment typically applies toward the purchase price.
â€¢No other party may purchase the property unless the buyer defaults.
â€¢The buyer typically cannot assign the lease purchase agreement without seller approval.
â€¢Buyers may be responsible for maintaining the property and paying all expenses associated with its upkeep, including taxes and insurance.
Bottom line, get a good agent to help with the lease/purchase; it will likely save many headaches. Good Luck!