Looking for opinions regarding lease to buy situation for Chicago downtown condos

Asked by Cary, Minneapolis, MN Thu Dec 9, 2010

Help the community by answering this question:

+ web reference
Web reference:


Jack Flash, , Mount Prospect, IL
Thu Dec 9, 2010
Hi Cary,

I assume that when you say you are looking for opinions, you're really asking if it's a good idea to consider that. With that in mind, I'll just say this. That depends on your situation.

Lease purchase and an option are two different things. So I'll address one, then the other.

An option is where you pay a fee to the seller for an option to buy the property at a future date for a specific price. If you think that the price you are getting is less than what the property will be forth at that future date, an option can be a very good thing.

A lease purchase would mean you're renting. But some of your rent money is going towards down payment. Depending upon the language in the contract, you may actually be entered into a purchase and not just a lease. It could also be a lease though, where the agreed upon portion of your rent money is going toward down payment and is being held in escrow. Depending upon the language in the contract, you may or may not get all your money back should you either default on your lease, or decide at some future date you no longer want to lease it.

The best thing I can recommend is to consult an attorney. In the state of Illinois, Realtors can't act as attorneys and give you legal advice no matter how knowledgeable they may be. Unless they hold a license to practice as an attorney, they can get in lots of trouble for pointing you this way or that. So by all means, use a Realtor to help you find a place and negotiate the price. Especially in todays market, there are so many places to consider, you need that more than ever. But talk to a real estate lawyer about the ins and outs of a lease purchase with or without option to buy.

I know several attorney's in the Chicago area. If you need a referral, drop me a line.
1 vote
John Gall, Agent, Chicago, IL
Thu Dec 9, 2010
"Lease to Buy" or "Option to Buy" lease agreements are typically structured to benefit the Lessee considering the right to exercise the option belongs soley to you, the Lessee. The longer term you can get the owner/landlord to agree to assuming a static purchase price, the greater the potential benefit to the Lessee considering a market that suddenly trends upwards.

The truth of the matter is that most owners and tenants are unfamiliar with the details regarding such a transaction. There are several savvy ways to structure an option to buy lease agreement. It is some extra leg work, but having an option at your disposal seems like a no-brainer assuming the owner agrees to favorable terms.

Consider that in this depressed real estate market, most homeowners are willing to listen to anything.
1 vote
Jose Hernand…, Agent, Chicago, IL
Tue Dec 14, 2010
Don't get locked-in, property values are not going anywhere for a long time. If you need to save money for a downpayment or restore you credit, work on it but don't get locked in. You will have more options and negotiating power compared to a handful of rent to own options, many of this places may be underwater too.

Good Luck!
0 votes
Matt Laricy, Agent, Chicago, IL
Thu Dec 9, 2010
Realtor Magazine just published an article today on this. I am copying and pasting the article below:

Downturn Makes Rent-to-Own More Appealing
As the housing downturn continues, rent-to-own contracts are becoming increasingly popular.

Rent-to-own allows buyers time to see if they like the property and time to repair their finances and get a mortgage.

Fritzi Barbour, an associate with Coldwell Banker Caine in Greenville, S.C., says many practitioners are unwilling to recommend a lease-to-own arrangement.

The negatives from a buyer’s standpoint: less flexibility than a rental situation without the permanence of owning and the potential loss of a hefty down payment if the deal doesn’t close.

The down side from the seller’s vantage point: the possibility that the buyers will be unwilling or unable to buy, but their presence make a purchase by someone else unlikely. Also, the seller doesn’t get the money right away, nor is there real closure to the deal.

Source: the Wall Street Journal, Sarah Max
0 votes
Suzanne Hami…, Agent, Orland Park, IL
Thu Dec 9, 2010
Cary -

I disagree. Rent to own is a valid way to make a deal these days. If you are a buyer and can not get a mortgage right now, why should you still keep renting and not be able to take advantage of the discounts in today's market. You can build equity. However, it is not an easy path, it takes the right circumstaces of buyer and seller. You need to be income-qualified, able to make payments, have a down payment and willing to correct credit or do whatever to get a mortgage within 6-12 months. Also realize, while you can take advantage of the market discounts, you are not going to get a steal, you are not in the best bargining position. But prices today are great and you will have equity in no time.

Sometimes it does require a desperate seller, but so what, most sellers are desparate today. And there are investors and rent to own companies spouting up everywhere. Because it is a growing trend in the market place. Look at it this way - you can jump now and get a good price and have your monthly payments going to something or you can wait and maybe pay more. It doesn't always work, but it is worth a shot. Check out my blog for some rent to own tips and let me know if you want some guidance.
0 votes
Scott Newman, Agent, Chicago, IL
Thu Dec 9, 2010
If you are getting the deal of a year in price locked in with an option contract in a secure building go for it but I have yet to see this be the case in any situation including lease to own.

In my experience these deals are put together between desperate seller and trusting but clueless buyers who put up non-refundable money up front that they lose when they turn around in a year and realize the price they agreed to pay is way too high so they walk- or worse they buy and end up losing the home to foreclosure.

Always consult a proven and knowledgeable Realtor before making any real estate decisions!
0 votes
Fred Scovell, Agent, Chicago, IL
Thu Dec 9, 2010
This is a very suitable approach especially in light of current market conditions. You should discuss with your lender what restrictions if any may exist for that portion of the rent which will be credited towards your downpayment.
0 votes
Philip Sencer, Agent, Chicago, IL
Thu Dec 9, 2010
Rent to own is a terrible concept and a poor choice for both buyer and seller. Many agents do not really know how it works. Why would a buyer-tenant want to lock into a 12-18mo lease and pay a higher than market rent or market rent for which some of the rent would apply to down payment when there is no guarrantee that he/she wil abe able to get a mortgage at the end of the term?? If you cannot get a mortgage now, what will change in as little as 12 months? You risk losing the portion of rent that is designated for the down payment. What if interest rates go up in that time and you no longer can afford or do not want the mortgage? What if prices go down and you see something better?
Why would a seller want to lock into a price for which he/she has no idea whether prices might be higher in 12-18 months? Why take on a tenant with poor credit and 'hope' that things change in 12 months or so? How do you get a rent to own tenant out if they cannot meet the terms of the contract? If they have an attorney in the family that might help.
For the buyer/tenant just rent until you can afford a mortgage and then go buy something. For the seller/landlord either rent until the market changes or drop the price and get on with your life. Rent to own is full of potential problems and I doubt that you could even find one in the downtown area.
0 votes
David Hanna, Agent, Chicago, IL
Thu Dec 9, 2010
A very broad based conversation point. There are some great opportunities in this area for the right buyer, right seller and right building. There are also many pitfalls and bad choices for an uneducated consumer.
I think for anyone to really discuss this with authority you need to provide some more detail about your own circumstance and what specifically you are trying to find out.
0 votes
Search Advice
Ask our community a question

Email me when…

Learn more