we are looking for a lease option to buy....need help...not many realtors have listing available

Asked by Mark Steele, Hueytown, AL Wed May 11, 2011

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, ,
Mon May 19, 2014
Rent To Own is a better deal for the Seller than it would ever be for a potential Buyer.

Key Points of Rent-To-Own:

• Portion of monthly rent payment is set aside by Landlord towards a future down payment
• Landlord/Seller locks you into a price today for a purchase tomorrow
• Forces the Tenant/Homebuyer to save towards down payment
• Tenant/Homebuyer still has to apply for a mortgage in the future to purchase the home

Rent-To-Own "forces" savings towards a down payment. Your Landlord deducts a pre-determined amount to hold in a special bank account, called an "escrow" account until you have saved up enough---through this "forced-savings" method---to meet a down payment to purchase the home.
At the end of the agreement, usually 2 to 3 years, you must apply for a mortgage loan to complete the purchase of the home. The terms of the purchase price, including the down payment amount, and the amount to be set aside from the rental for down payment, are all set down at the time of lease signing.

You can save for a down payment on your own.

If you are dedicated to the idea of buying a home, create a savings plan. When you have enough for a down payment YOU get to decide on the price you're willing to pay for a home based on market conditions.

With Rent To Own you're locked in to the house and to the price. What happens if three years from now your life situation has changed? Maybe you need a bigger/smaller home. Maybe your employment has relocated. Maybe your credit or income is insufficient to qualify for a mortgage loan.

Get Prequalified by a local Mortgage Banker. You may find you're qualified now for a mortgage loan.

Trevor Curran
NMLS #40140

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, ,
Sat May 17, 2014
Hi Mark,
Doing a lease purchase/rent to own can be a very risky for a Buyer. I do not suggest doing lease purchases/rent to own. There are simply way too many things that can go wrong with one from either side.

In order to do true owner financing, the owner must own the property free and clear of any mortgages. Very few sellers are going to be in that position.

If the property currently has a mortgage on it, the owner cannot legally transfer the title to a buyer without the mortgage first being paid in full. Most all mortgage loans have a due on sale clause. This due on sale clause requires that the mortgage be paid in full should a title transfer occur.

The buyer is also at great risk on a lease purchase transaction should the seller quit making their mortgage payments. Right now, many sellers cannot afford to make their mortgage payments or simply chose not to continue making them. I have seen where the buyer is making their rent payment, but then the owner is not paying the mortgage. The next thing the buyer knows is that the home is in foreclosure. That means the buyer will generally not get back any of the money they have given as earnest money or security deposits.

It is also a big risk on the buyer. If your credit is not where it needs to be now, there is no possible way of you knowing it will be acceptable in a set amount of time.

Before entering into any type of agreement like that, the buyer needs to make sure that they fully understand the potential pitfalls that could arise. Should the seller default on the mortgage, the buyer could lose ALL of the money that they have invested. Until you are able to purchase, renting is generally the safer option.

Working with a knowledgeable and seasoned loan officer is critical in today's market. Getting Pre-Qualified is the only way for you to find out your options to see if purchasing might be a possibility for you. To get Pre-Qualified for your purchase, you can submit your request online at http://www.rodneymason.com to get started.

Rodney Mason, NMLS #151088
Sr Loan Officer
Prospect Mortgage
825 Juniper St NE, Atlanta, GA 30308
Office: (404) 591-2453
Apply Online at http://www.rodneymason.com
Licensed in Alabama & Georgia with over a decade of mortgage lending experience.

Prospect Mortgage offers a full selection of mortgage programs including:
Conventional | FHA | FHA 580-639 FICO | FHA 203(k) Renovation (Streamline & Consultant) | HomePath® | HomePath® Renovation | HomeStyle® Renovation | VA | USDA | GA Dream | Jumbo Financing.
0 votes
Larry Brake, Agent, Aurora, CO
Thu Apr 24, 2014
Hi Mark,

While it is true that inventory levels for lease options are down, it also true that inventory are down across the board. At least that is the case in Colorado. I'm going to suggest a different approach, starting with asking yourself why a lease option? What are you hoping to achieve with a lease option that you couldn't do just be renting or buying?

Frankly, I generally council my clients against a lease option. You will usually pay a nonrefundable premium and above market rent rates and you own nothing during that lease period. You also do not get a mortgage interest tax deduction during the lease.

I think you should consider what your upside is with a lease option. I am curious to hear your thoughts on that. If you're not ready to buy, why not just rent a place without all of the extra expense typically associated with a lease option?

Best of luck to you!
0 votes
Renee Hamilt…, Agent, Alabaster, AL
Thu Apr 24, 2014
This is a 2014 update. Today it can be nearly impossible to find a "least to purchase" option. The inventory levels on homes are coming down and most buyers will be able to sell their home. With this being said, there are exceptions. To start you should still speak with a lender to find out what your options are. Most sellers will want to know if you can close on a loan within 12 months before they would even consider a lease to purchase option.
0 votes
Monir Mamoun, Agent, Denville, NJ
Wed May 11, 2011
hi Mark,

I have some colleagues who may be able to help. Please pass me your contact info and I'll have someone from EXIT Realty contact you. Keep in mind you may have to sign a slightly unconventional contract to get this done (with respect to fees) since lease options are fairly unusual transactions.

take care,
0 votes
Keith Andrews, , Birmingham, AL
Wed May 11, 2011

Where are you interested in living in the Birmingham area? Have you considered that some sellers may want up to $8000 down to make sure you have "skin in the game?" Many more questions to consider prior to finding a home. Let me know your thoughts and allow me to be of help if you need some.
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