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Lease Purchase Agreements are not new to the American real estate
market. They have been the preferred exit strategy for many real estate investors
and retiring landlords for decades. They have also become a popular
option for home sellers that need to get their property sold without
slashing the asking price.
A lease purchase agreement allows the
seller to get top dollar for their property because they are allowing the buyer rent the house until they are able to close on
the purchase (or until the expiation of the agreement).
The seller usually requires a reasonable
purchase deposit.
If the buyer purchases the property before the
expiration of the agreement, the deposit will be credited toward their
down payment but if the buyer defaults on the agreement, the
purchase deposit is non-refundable.
The term of a lease purchase agreement is typically from twelve (12)
to twenty four (24) months. However, the length of the agreement is
completely negotiable between the two parties when filling out the
agreement and many buyers are able to close much sooner than the
deadline agreed to in the contract. Often this is because they are
able to qualify for a mortgage quicker than they originally thought.
Sometimes the buyer simply needs some time to sell their old home or
they may need to establish a short history of making monthly lease
purchase payments before they are able meet the requirements for a
new loan. Those are two of the more common reasons a buyer may need
to get into a house on a lease purchase. But there could be a number
of reasons a buyer would want to do a lease purchase and it is not always because of credit or income
problems.
Most sellers prefer to charge a monthly payment that is a little above market
rent to allow a portion of the monthly payment to count toward the
purchase price. This can be a big incentive that helps to attract
buyers. The amount of this monthly purchase credit is completely
negotiable between the buyer and seller when they are filling out
the agreement. And since the seller will
typically be asking a price toward (or slightly above) the top of the market for a
property offered for sale as a lease purchase, the monthly rent
credit generally works out good for both parties.
Since the seller is usually locking in the price up front and the
buyer intends to be the future owner of the property, the buyer is
typically required to take care of the repairs and maintenance.
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