Lease with an Option to Buy ("Rent-to-Own"):
- A lease-Option is an agreement is a unilateral agreement between a Seller and a potential Buyer.The tenant-buyer has the right to occupy the property and the "option" to purchase the property during, and at the end, of some specified period of time. The tenant-buyer is under no obligation to exercise the option to purchase, but if the tenant-buyer does exercise the Option, then the Seller must sell the property no matter what.
- A land contract, also commonly known as a Contract for Deed depending on the state that you live in, that is a bilateral agreement where both parties agree to perform at some point during the term. There is no lease agreement in this contract. The buyer will not occupy the home until the sales transaction is complete, at which time, the buyer will become the new owner of the home. The seller will become the bank.
- If the buyer defaults, the seller would be forced to foreclose on the buyer whereas in a Lease-Option, they would evict them instead.
- Sellers that sell this way, generally require a larger, upfront down payments since they are extending for more control over their property and expect, naturally, to be compensated for giving away this amount of control.
We hope this helps. Enjoy!
Russell & Diana de la Peña