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Should I Consider A Lease Purchase?
Note: 2 contracts are used for a Lease Purchase. The Purchase and Sale Agreement and a Rental Agreement. We help you with the Purchase Agreement as part of the fee that we charge - .0034 of the sales price. We collect the .0034 of the sales price at the time that the agreement is signed as binding between you and your buyer. We charge an additional $250.00 to help you negotiate and give advice for the Rental Agreement. The buyer's agent, if there is one, will be paid at the closing of the Purchase Agreement, unless otherwise agreed to by you.
Lease Purchase Sample Agreement for your review. Here is the Lease portion of the Agreement.
A Lease Purchase is a formal agreement wherein a Renter ties up a home that they are renting with the intention of buying the home at a price that is negotiated at the time the renter moves in. You must sell the home if the Renter wants it, at the price and terms agreed when the contract states that the home will close. The current contracts do not have penalties to a Renter if they don't purchase. We advise that you add a penalty to the contract if they do not close. We recommend 3 to 5% of the sales price as the earnest money/down payment to be noted in the contract as a non-refundable earnest money should they not purchase. If they do purchase, the amount agreed and collected will be applied to the purchase price at the time of sale. You will hold the money during the transaction.
This down payment/earnest money is not the security deposit and you don't want to write it that way in the contract. The 3 to 5% mentioned above is added to the Purchase part of the contract.
We also recommend that you do not collect more than the rent per month stated in the contract as part of the earnest money/down payment. Keeping your accounting straight makes it much easier to evict the Renter for non-payment of rent.
Utilities are agreed upon at the time of the Rental Agreement.
When the Renter transitions into buying the home, they will contact a lender who will start the process of the loan. The appraisal will be done then. However, unlike a traditional purchase, we would recommend that you write the contract in a fashion that states that the Renter will get the normal home inspection before move-in and the Rental period starting.
Should the buyer not qualify for a loan at that time, you can re-negotiate all terms and do a new contract, if you wish.