A Lease option refers to an agreement where the tenant is given a choice to purchase the property of residence during the renting period or towards the end. The owner will first make this offer to the tenant. When the rental term expires, the tenant must make a choice to either purchase the property or let it go.
In other words, a Lease Option is also known as the option to purchase. This option gives the buyer of the property much flexibility in comparison to the standard lease agreement. When the tenant decides to rent the house, the individual will also have to sign a contract that the house will be purchased. The price is agreed upon by the buyer/tenant. The price of the home is usually the Market value of a home. However, it gives the buyer the flexibility of buying the house in the future at today’s market price. This option usually comes with a fee which could be 1% of the sale price.
There are two reasons why a lease option exists and they are mentioned below:
Tenants enter into a lease option so that they can save up enough money to buy the property. It gives them an option to also build their credit. One of the major benefits they enjoy is to buy future property at today’s price.
Owners of a particular property may enter into a lease option may be because they have trouble selling the property. The lease option makes it an attractive option for potential buyers. If the owner is thinking of selling the property in a few years, it allows them to collect a premium, which is above the current market for rent.