If you ever wanted to know the difference between these 2, here is a very simplified explanation.
Many people want to take advantage low real estate prices and purchase a home in today’s buyer’s market, but are unable to do so because of some credit issues that require some time to repair.
But with so many homes for sale in today’s market, many sellers are willing to offer the possibility of a lease purchase or a lease option. Both of these avenues are ways to set a purchase price in today’s market with a closing at some pre-defined point in the future.
The difference in a lease purchase and a lease option is a subtle one. Both offer a separate lease and purchase and sale agreement that are in effect concurrently. During the lease portion of either arrangement, the relationship is strictly one of landlord and tenant.
A lease purchase agreement is like any other purchase and sale, except the closing date is chosen to coincide with the expiration of the lease. At the end of the lease period, the purchaser is obligated to purchase the property according the terms that have been negotiate.
A lease option allows the tenant to purchase the property at any time during the option period, but the tenant is NEVER obligated to purchase the property. It is entirely up to the owner of the option as to whether or not a purchase is consummated.
In either case, the terms and conditions of sale are negotiated in advance, and title in theory is extended by the seller. This usually means that the seller cannot sell the property to anyone else unless the agreement is breached or terminated.
Lease purchases and lease options are both great ways to cash in on the buyer’s market of today. It could open the door to the house of your dreams.
Note: Laws vary by state. Always consult with an attorney before entering into any contractual agreement!
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