Lease/Purchase - Too Good To Be True?
In today's world one can "buy" many
things on a Lease to Purchase basis. Furniture and appliances are common.
Believe it or not, you can even "lease to own" tires for your car.
So, what about real estate?
Inquiries abound for "lease options",
"lease purchases", and so on. The basic idea is that some portion of
the rent goes toward the purchase of the property at a future time. And, in
some cases, it can actually work OK. However, before you sign up consider the
following:
Why would an owner want to "sell"
this way? Usually the property has some kind of problem that precludes a
regular sale. Common are a bad locations, structural problems and other
defects. Or, the owner may want more than the house is worth in the current
market.
Why would a buyer want to "buy" this
way? Mostly, it's because they can't obtain regular financing. There may be no
cash, bad credit, excessive debts, insufficient income, or some combination of
these. Divorce or religious issues could also prevent a normal purchase.
What about price? Purchasing means that there
must be a price. If the purchase is not until some future date, when and how
will the price be agreed? Would the seller want to fix the price today not
knowing what future market conditions might be? Would the buyer? How would a
future price be determined?
What if the purchase never happens? Does money
put aside for the "Option" go to the seller or the buyer? What about
improvements made by the buyer during the lease period? These are only a few
of the sticky issues that can arise.
The bottom line is that some things that sound
"Too Good To Be True" may be just that. So, any buyer or seller
contemplating a real estate "lease/purchase" needs to really really
do their homework. To be prudent, representation by both a Realtor and a real
estate attorney is recommended.
First Published 7/25/00 (1/10)
