Is lease to buy a good option in a slow market?

Asked by Diego, Hiltn Head Island Tue Aug 14, 2007

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Julie (Toon…, Agent, Hilton Head Island, SC
Wed Feb 6, 2008
Hi Diego,

It depends on so many factors and I am assuming that you are a buyer.

I think a lease with an option to buy would be better than a lease to buy agreement. With a lease to buy, you must close on the property at the end of the lease. With a lease with an option, you don't have to buy the property at the end of the lease but have the right to do so at then end of the lease. If the market goes down, you can walk away. If the market goes up, you have locked in a very attractive price.

Hope that helps
1 vote
Deborah Madey, Agent, Brick, NJ
Tue Aug 14, 2007
There is much advice against a lease/option. Research indicates that most renters do not become home owners under that arrangement, but instead forfeit their deposit money. The research and warnings primarily address situations where the tenant buyer is putting up option money that is at risk. When prices are escalating and you can lock in a good price today for a purchase tomorrow, it might be worth considering. Today, only if you do not have to place large option deposits do I recommend it for my tenant/buyer.

Buyers are in the driver seat and can negotiate terms that are favorable for them. To the want-to-be buyer, I would suggest this option type arrangement with minimal (a nickle above nothing??) option money on the table, a pre-determined sales price, and the right to exercise purchase rights any time during the course of the lease.

If the want-to-be buyer feels confident and can qualify for a mortgage, he/she can take action. If prices escalate, the pre-determined purchase price protects the buyer. If prices go down, the buyer doesn’t purchase or renegotiates the purchase price. With minimal option money at risk, a buyer has these choices.

Why would a seller agree to this? If a seller has an empty house and no buyer prospects in sight, the rent payments for a year are better than sitting on the market for sale and becoming more stale.
1 vote
Bill Brannon, Agent, Hilton Head Island, SC
Thu Feb 14, 2008
Hilton Head Island is notorious for bouncing back with a vengenace after a real estate slow down. Right now is a perfect time to BUY. Inventory selection is at its best, prices are outstanding, sellers are negotiating like never before, interest rates are good, buyers have all the power and deals are plentiful. So what are you waiting on? Pick up something now. If you are waiting for an email from Heaven to tell you the time is right, consider this it. Call me. I have been doing this down here for 30 years and I can assure you, now is the right time to pick something up.

Bill Brannon, Hilton Head Island, SC
843-384-4111 or 800-267-3285
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Cheryl G Gal…, , Florence, SC
Tue Aug 14, 2007
It is expediate for some persons to choose this route. For the long run, it will cost you more money. You will give up your abillity to negotiate favorable terms and not knowing the interest rates you will be facing in a 6 month or 1 year lease will seldom be to your favor. Purchase in your comfort level and you will find many sellers glad to negotiate for a fast closing. .
0 votes
Carrie Crowe…, Agent, Southaven, MS
Tue Aug 14, 2007
Are you asking as a buyer or a seller. You may see more sellers offer to this in a buyers market than in a sellers market.
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