“Rent to Own / Lease to Own.” These options allow the buyer to lock in a price on a property for a year or so while they secure financing through a lender, or sometimes a buyer wants to just have the option to purchase a property at a later date.

There are actually three different financing options: Options to Purchase, Lease Options, and Lease Purchase. These options have legal variances according to the state in which you are using them. It is always a good idea for the buyer and the seller to obtain the advice of a real estate lawyer when entering an agreement of this sort.

Options to Purchase. This option allows the potential buyer to “lock in” an agreed upon price for a home to be paid at a later date. The buyer then pays the seller “option money” for the right to buy the property later. The actual purchase is usually a year to three years later. The option money can be substantial or as little as a dollar.

The purchase price is negotiable and can be determined at any time, although it is common to determine the price at the time of the inception of the option.

The term of the option agreement is usually a year, but it too is negotiable.

Option money is usually not refundable. If the buyer decides for any reason, unless otherwise stated in the agreement, not to purchase the property at the agreed upon time, the seller gets to keep the option money, and at the end of the option term. he may sell the property to someone else.

The seller may not sell the property to someone else during the term of the option. The buyer is not required to purchase the property at any time, and they may sell their option to another buyer.

Lease Options. This option has the same requirements as the Option to Purchase as well as the following requirements: The buyer agrees to lease or rent the property during the option term for a predetermined amount of rent. The buyer may not assign the lease option to another buyer without the seller’s approval

The option money does not apply towards the down payment, and usually a portion of the monthly rent money applies towards the purchase price.

At the end of the option term, the buyer is not required to purchase the property. If the buyer does not purchase the property, all monies applied toward the purchase of the property is forfeited to the seller.

Lease Purchase. This option has the same requirements as the Option to Purchase and the Lease Option except the following requirements: The buyer is required to get bank financing within the specified amount of time in the lease purchase agreement and the buyer is required to purchase the property. During the term of lease purchase, the buyer is usually responsible for maintaining the property and paying all expenses associated with its upkeep. The buyer also pays taxes and insurance on the property during the lease purchase term.