A Lease with Option to buy contract is perfectly viable but has a number of features you must be aware of.
1. There must be "Consideration" i.e. a Down Payment. The amount is negotiable. This can considered a part of your eventual purchase deposit, or a non-refundable "Option Fee" lost if you do not go through with the purchase in the time covered by the contract.
2. The contract must have a "Time Absolute". In other words a future date by which you must complete the purchase or lose your deposit. This time frame is negotiable and con be negotiated such that the contract can be extended by mutual agreement of all prties. This would typically be a non-binding clause.
There are numerous other conditions associated with these contracts so you would need to be certain you are being represented by a competent Realtor and, in my opinion, obtain legal advice prior to signing up for such a transaction.

Ted:

Lease/options on desirable well-located homes on the Peninsula are extremely difficult to find.
The only way you would get an owner to accept a lease option is to offer a price well above market value.
If a property was worth say $1M in the current market, why would the owner agree to sell it to you in a year for $1M if he could get $1M now? It doesn't make sense.

My sense is the market around here will be flat for another year or so. No guarrantee but my best gut feel after 30 years selling property in this area.

My suggestion would be to rent - get to know the areas and then buy when your current home sells.

Hello Ted. Yes, a lease option is a possibility and I would like to just add a few things to what Bill has already mentioned. Most people want to sell outright and I would want to know the reason why the owner is willing to enter into a lease option agreement. These days, many home owners are in distress and they need to get out from under. When they can't sell the house, they are willing to enter into a lease option agreement. You want to make sure that you are not putting money down on a house that's already in default and scheduled to foreclose and you also want to make sure that the owner will make monthly payments. You would not want to enter into a 1 or 2-year lease option just to find out that the owner stopped making payments. Perhaps the transaction could be structured in a way that will allow you to deposit money in a trust account every month and the house payments are made from that trust account via automatic withdrawal and the owner does not have the authority to withdraw money from the trust account without you signing off on it. You could also record a document that would require the lien holders to notify you when they initiate foreclosure proceedings. I hope this helps. Good luck.

I would just lease and then consider a buy once you have your equity.