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What benefits do a lease option hold for the seller?

Asked by Trulia New York, New York Mon Jan 28, 2013

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OK , you found the person who wants to buy the property, but does not have down payment secured or in place yet, and therefore cannot make the purchase. Giving that person the option to enter into a lease prior to making the purchase is a benefit.

Depending on how the contract for the lease option is drawn up, you can indicate that the agreed upon selling price will be discussed later. If you think the market is going up, this is a benefit.

If the seller needs to postpone closing on the unit for tax or other reasons, a lease option is a benefit.

Rhona Magelowitz, Broker, CPM, Title Closer, Notary
Rhona Realty
Forest Hiils, Queens, NY 11375
347 262 2421
0 votes Thank Flag Link Tue Jan 29, 2013
This is not a lease with option to buy-this is a straight month to month lease, and the rent is below market.
0 votes Thank Flag Link Tue Jul 16, 2013
I’m guessing that you’re referring to a lease with an option to buy? If that’s the case the benefit is that you’re collecting a slightly higher rent (rent + addtl funds to be applied towards the down payment) and also have a contract of sale for a later date. If the tenant/buyer decides not to go through most of these contracts are written whereby the portion of the rent that would have been applied to the down payment is forfeited.
0 votes Thank Flag Link Fri May 31, 2013
A lease option can help the Seller market to a greater number of Buyers in some cases. Not sure if a lease option is a good idea with the current trends but depends on your specific circumstances. With a lease option a Seller can get a greater commitment from a Buyer instead of just renting the property. Specifically, an option payment and an agreement defining how the buyers will purchase in the future. It could help sign a buyer who may not be able to qualify today or needs more time to get their full closing costs together. Discuss it with your attorney and local Realtor to better understand the pros and cons.
0 votes Thank Flag Link Wed May 22, 2013
I work with investors who lease with option to purchase. And the most important thing is to find out what is the buyers plan of action to be able to buy in 18-24 months or whatever the terms are! Therefore, it is essential that the sellers understand that the buyers need to have a plan in motion so they can actually fund the purchase when the lease comes due.

Have a great day;

Christina Solorzano;
CEO & SR Credit & Mortgage Consultant of
Everlasting Credit Repair
Making home ownership more than a dream...
Retired Mortgage Banker
0 votes Thank Flag Link Tue May 21, 2013
The benefit to the seller is that they :
1. Have a potential buyer secured for the property.
2. If the buyer does not exercise the option they may have been able to recieve higher than market rent on the property.
3. They will have more potential buyers for the property.

The down side for the seller:
1. Depending on the agreement, they may not be able to sell to anyone else during the option period.
2. They are locked into a price for the sale due the option. If the property value goes up the seller could loose some of his potential gain.
0 votes Thank Flag Link Tue Jan 29, 2013
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