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 and more than a few dollars. Good Luck!