I have been living in a lease-option home for nearly two years. I like the place and have now decided
I'd like to purchase it at the end of my third year. However, the accumulated-monies arrangement was not
in my initial contract. Was that a big mistake on my part? Is it too late?
-- Marshall C.
No, it's not too late. And because of current market conditions, your "mistake" may not end up costing you much of anything.
Unless there is a conventional
buyer waiting in the wings or some other sale
arrangement to which you're not privy, you can
still forge a lease-option deal, assuming the
landlord/owner is willing. With values stagnant
or still dropping in most markets, your terms
may actually be better now than they were a couple
of years ago, and the owner may be even more willing
to deal than when he first offered you the option.
In fact, you may be able to lock in a lower future
purchase price than you would have two years ago!
In a lease-option arrangement, you are basically paying money to the seller for the right -- but not the obligation --
to later buy the property. A lease-purchase, on the other hand, obligates you to buy.
Of course, you will still be out
the two years of rent you've paid. In most lease-option
arrangements, that extra money you pay for the
right of option isn't what is directly applied
to your down payment. The rent money is. But given
the slow market conditions, don't hesitate to
ask the landlord if he can give you some form
of prorated credit for the rent you've already
paid him. It's worth a try. After all, the terms
of these option arrangements are always negotiable.
Most lease-options span one to three years in length. You may be able to accomplish with your one-year option
horizon what you would have accomplished in those two lost years, providing you can afford the extra rent/option
money you'll pay in such an accelerated scenario. Whatever agreement you strike, make sure it's structured so no
one else but you can purchase the home during the option period. And I may sound like a broken record on this,
but have a real estate lawyer or other qualified attorney review the lease-option contract, if at all possible,
before you sign.
Another suggestion is to make a flat-out offer for the place, subject to financing, that is less a set percent
of the rent you paid over the last two years. Of course, with subprime financing tougher to come by now, that
may be a challenge if your credit is poor or not established.
One buyer objective of a typical lease-option -- the "tire-kicking" phase that allows them to size up the
place as they live in it -- is already moot since the house has obviously passed muster in your eyes.