Lease-to-Own, part 2

In the last post, we gave a brief overview of what it means to enter into a lease-to-own agreement. Now let’s talk about more of the pricing and payment details surrounding such agreements. A lease-to-own contract can be just as (or maybe even more) complicated as a traditional real estate transaction.

Just like layaway, rent-to-own and other situations where you are paying on installment, the buyer in a lease-to-own agreement must agree to purchase the property by a certain date. Lease-to-own agreements can last anywhere from six months to a few years.

When you lease-to-own the money you pay each month is not a mortgage. Instead, you pay a rent and some of that rent will be used to cover the price of the house. There is technically no down payment in a lease-to-own agreement, but the buyer does give the seller an agreed-upon sum once the contracts are signed. The sum is known as "option money" and more often than not the seller keeps this money if the buyer ultimately decides not to go through with the purchase of the property.