Looking to sell your home but don’t want the time and effort of a traditional real estate transaction? A lease purchase agreement may be just what you need! Learn how this method of selling can get you top dollar. Also learn how it can reduce the risk and stress associated with a traditional sale.
What Is a Lease Purchase?
A lease purchase is a contractual agreement between the buyer and seller of real estate. Both parties agree on the eventual purchase price before signing the contract. The buyer agrees to pay rent at regular intervals over a set period, with an option to purchase when all terms of the contract have been met. It’s an attractive way for sellers to get more money for their property while freeing themselves from the time and effort involved in a traditional sale.
Benefits of Lease Purchase Agreements
Lease purchase agreements have many benefits over traditional sales. For the seller, they can get a larger return on their investment, and have assurance that the full purchase price will eventually be paid. On the buyer side, it allows them to take possession of a property and move in without having to fork out large amounts of money up front and offers bonus time to raise the necessary funds for taking full ownership.
How to Set Up a Lease Purchase Agreement
Setting up a lease purchase agreement when selling your house is not difficult. You start by working out the details with the prospective buyer such as what the base purchase price of the property should be.
Here is the way our company goes about buying on a lease purchase. We take over all responsibilities for the property, including any loan payments, taxes, insurance, and upkeep. We also agree on an end date. On or before that end date that we agree on, it turns into a traditional sale. At that time, any underlying loan gets paid, and the seller gets the equity. (Our company does not typically pay monthly rent over and above paying for the loan payments and other expenses, unless the purchase price is discounted.)
Once these terms have been agreed upon, both parties should draw up and sign a contract that documents all of these conditions. The contract should also specify when full ownership of the property will transfer to the buyer.
Payment Terms
When setting up the payment plan for a lease purchase agreement, details such as the total amount owed on the property, when payments will be due and whether they can be late need to be clarified in the contract. The terms should also state required deposits, such as security deposits and down payments; monthly rent amounts; and how payments can be made (by check, cash or other methods). Additionally, it’s important to clearly outline any penalties for late or missed payments. This helps ensure both parties understand their obligations in full so there are no surprises down the road.
Closing the Deal on a Lease Purchase
Once all of the terms are settled, closing on a lease purchase is similar to any other traditional home sale. Prior to the closing day, you and your buyer will need to negotiate and sign an agreement outlining the purchase details so that both parties have a clear understanding of their rights and commitments. On the closing date, both parties will meet with a title insurance company or real estate attorney who will make sure all documents are completed accurately and review them one last time before authorizing the transfer of ownership from seller to buyer.
