Karen
Doing a lease with an option to purchase does not specific terms that are required but there are things that would be commonplace in putting together an agreement like this. Usually the price to close the option is stated in the original agreement and in an unwards market certainly that favors the borrow. Both parties could agree to determine the price, by appraisal for instance, at the time buyer gives notice to exercise the option. It is not required for the buyer to complete the sale but they would have the first opportunity at a specified, future time to do so. Some sellers may credit the buyer with a portion of the lease payments toward the purchase costs, others may not. It is not unusual for a seller to ask for a non-refundable deposit in giving the buyer the opportunity to purchase at an agreed upon price in the future. If neither buyer (leaseee) or seller (lessor) want to determine a purchase price at the time of a lease it might benefit both to give the buyer a "first right or refusal" rather than a lease option. This would mean that a specified future date the seller decided to sell the property the buyer would be given the first chance to purchase it at a price set by the seller or negotiate with the seller in the future for a purchase price.
Mary

usually... lease w/option ... you sign two contracts when you start...one is the lease contract ...the second is the option to purchase contract..typically you will have the price set. ....and you will usually have to pay to have the option. The amount varies ...depends on what the seller wants and what you're willing to pay for it. If you do not exercise the option to pay ... depending on how your contract is written..you probably won't get the option fee back ... since it was a fee just to have the option. ... again..as with any purchase contract..it could be written in lots of different ways... what I wrote here is just one way.

Karen,

There are LOTS of different way these can be written. You really need to have someone like a real estate attorney review any contract like this that you're going to sign. They're usually written by the seller, and therefore leave the bulk of the benefit in the seller's hands.