How do lease options work and what are the benefits?

Asked by Juicedformovin, Seattle, WA Thu May 23, 2013

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Andy Coats, Agent, Marysville, WA
Thu May 23, 2013
Some times the option is a good thing for the buyer if, you can get the seller to lock into a price now.With prices on the rise in the area there is at least that benefit (most however want to set the price at the end of the rental contract).Also depending on the lease usually the down is bigger and will allow you to have a smaller monthly mortgage payment in the end .You can write many things into a contract so be very careful.Make sure the contract states what you are willing to pay and how much will applied to the down payment and if it is refundable.The seller may want to keep it all if you decide not to buy.
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Ray Akers, Agent, Seattle, WA
Thu May 23, 2013
For the buyer, a lease-option lets you take possession of a home today by lease, and then buy later as your credit and savings improve. The set-aside from the monthly rental payment is a forced savings plan. At the end of the lease term, you'll have a pot of money which can be applied to the down payment. If you choose to walk-away from the sale at the end of the lease, you will lose the pot of money as it stays with the seller.

For sellers, there is more risk than benefit with a lease-option purchase. You have a lease tenant, but you may or may not have a sale at the end of the lease. Not every lease-option makes it to closing. As compensation, you'll have the buyer's down payment, but you won't have a sale. Plus, the condition of the property may require repair and improvement to ready the property for the market.

Lease-option purchases happen infrequently for a reason. There may be some advantage for a buyer who has no other option, but the risks outweigh the benefits for sellers.
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Mack McCoy, Agent, Seattle, WA
Thu May 23, 2013
The benefit is that you get a larger deposit and increased rent over what you'd get on a straight rental deal. Plus, there's not really much chance that your "buyer" is really going to want to buy it when they get their credit straightened out, because then they'll have the entire marketplace to choose from.

Hope that helps,
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Tim Moore, Agent, Kitty Hawk, NC
Thu May 23, 2013
There are few benefits to you and there are many more disadvantages that can cost you money. They are best avoided, but if you must get involved in one get a lawyer to write up the contract to help you avoid the many pitfalls as much as is possible.
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