Your question: "Looking for a Lease Option on a home in Exeter/Portsmouth areas....purchase price to be between 400-650k. Lease terms - would prefer 2 year with option to extend 1 more year before exercise of purchase option, but would consider shorter term. Need a home yesterday....so any help is appreciated.... thanks, M.
Often buyers find themselves asking for a lease option but in fact only want a rental, with a "first refusal" right.
Rentals with right of first refusal, tend to be simple leases--and as the rental term comes to an end, the seller announces to you (first) what he wants for the property and then you decide if you want to make the purchase. If you do, then you will execute a P&S, if not the landlord will list the property for sale.
Lease options on the other hand, are formal contracts and unlike "rights of first refusals" are not free, they are purchased--and they give you the right to buy the property at a pre-determined price at a pre-determined time in the future. Failing to exercise the option means you will lose the money you paid for the option.
Just to be clear, if you wanted to buy a $500,000 (today's value) home in Portsmouth but not close for 3 years, you might offer $15,000 today for the option to buy the same house for $550,000 in 2012.
In 3 years, at the time to exercise the option, the house is worth $650,000--then you will make $100,000 when you close*; if on the other hand it is still worth $500,000 you can buy it and overpay $50,000, or decide not to buy it and lose the cost of the option ($15,000)
*finally, if you find the house is worth $100,000 more at settlement than you have contracted to pay for it, you can sell the option, for up to the difference ($100,000 in this case), without actually closing on the home or personally taking possession.
Keller Williams Realty ~ Portsmouth, NH ~ 603-566-5460
Tarpon Coast Realty ~ Boca Grande, FL ~ 941-460-8979