Hi Las Vegas,
Lease-options can be tricky, but here are some general points on how they work.
1. The lease is the contract that establishes rent for the property which may or may not include a premium above the rent rate. The 'premium' remains in an escrow account and accumulates over the life of the lease agreement such that when the buyer chooses to exercise the option, monies have stacked up that serves as partial downpayment. Meanwhile, the monthly rent monies pass through an escrow company to the seller. So, if your monthly rent is $1,000, try and afford $1,200 or $1,500 so those additional monies stack up over time. You may also choose an interest bearing account that a title company will assist you with establishing. Those monies are also protected in escrow should you choose to not exercise the option, but you will be losing the option 'price'.
2. The option 'price' is a price which may or may not be credited to the eventual price of the subject property. The seller & you as buyer may negotiate this option price and there is no standard. The option is a recorded document. The option has an expiration date. Additionally, provisions within the option agreement for transferability and setting property price are agreed. You do not typically set the price on the property at the time of option agreement, but in the future when the option is chosen to be exercised. As the buyer, If you set price now, the property may decline in value when you choose to exercise the option such that appraisal may be an issue and moreso buying a property for more than what it is worth. On the other hand, the property may appreciate in value over this time. Typically, any seller under good counsel will agree to setting the price when the option is chosen to be exercised. This is so the seller may gain in appreciation, but in this market who can predict pricing 2-5 years from now.
3. Lastly, hire a good attorney to handle the paperwork. If there is a broker involved, they don't get paid until the option is exercised and the property actually sells. This may relieve a seller who would want to collect enough monies now to cover any requested broker fees and which would ultimately become more expensive for you up front.
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