A growing number of buyers and sellers are choosing to agree to lease options that allow the buyer to rent a property with the option to purchase the property at the end of the lease period. Whether you are a buyer or seller, there are many pros and cons that should be examined before deciding to enter into this type of agreement.
Exploring the Pros and Cons for the Buyer
As the buyer, agreeing to a lease option arrangement can have many benefits. Namely, it gives you the opportunity to experience the ups and downs of homeownership while also getting more familiar with the community. It also helps to eliminate competition because you are the only one who has the option to purchase the property at the end of the lease period.
Another benefit to the lease arrangement is that many of these arrangements allow for a portion of the rent to go toward the ultimate purchase of the home. Of course, the full amount that you paid toward rent does not go toward payment of the home. Therefore, if you are absolutely certain that you want to purchase the home, it would make more sense to simply purchase the home upfront rather than entering into a lease agreement. On the other hand, entering into a lease agreement can be a good financial strategy if you lock in a purchase price at the beginning of the lease period. If the value of the property goes up in the meantime, you will have made a good investment. If the value does not go up or if it goes down, on the other hand, this may not be a good property for you to purchase.
Exploring the Pros and Cons for the Seller
A lease agreement offers several benefits to the seller as well. For sellers who are having difficulty selling the home at the price they are asking, a lease option allows for immediate cash flow until the home can be sold at the desired price. By offering the lease option, the seller also increases the pool of potential buyers because some buyers are specifically looking for properties with a lease option.
As a property owner who is interested in renting out a property, the lease option can also improve the quality of tenants. After all, if someone is considering the possibility of purchasing the property in the future, he or she is more likely to take good care of the property.
Keeping the Buyer and Seller Protected
To ensure both the buyer and seller are protected within a lease agreement, it is important to take a few simple steps before signing any contracts. One of these steps is to complete a home inspection and to document any repairs that are necessary. It is also a good idea to take pictures document the overall condition of the home. You should also make sure all payments, such as taxes, mortgage and insurance, are up-to-date and that there are no liens against the property. You should also specify the terms for purchasing the home at the end of the lease or during the lease period.