Question:
Hi Gary. We’re not ready to buy a home but have heard about a lease + option to buy. How do you feel about those?
Answer:
If you can find one, lease-to-own or lease-option might be a good choice for you. If done right, you can lock in a price on a home and decide later (typically in a year or two) if you want to exercise the option.
But there are a few downsides, including:
- Very few people want to offer a lease-option, so they are extremely hard to find.
- Many “buyers” doing a lease option agree to lease-option terms that are not in their favor.
- Lease-options are complex and can lead to problems later if not done correctly. A friend of mine was sued because he didn’t handle a lease-option correctly.
Regarding #3, a lease-option should have 3 parts: lease, option, and purchase contract.
Many people skip the purchase contract. But without a completed purchase contract with all the sale terms already negotiated, you could have problems later if you don’t agree on these terms. This includes who pays which costs, etc.
Good luck, and be careful!
