Q&As
- What is the difference between a real estate agent and a real estate broker?
- What steps do I go through to buy a house?
- How long does it take to buy a house?
- I want to buy a house. I know the property and the seller has an agent. Do I need my own agent or can I negotiate a lower fee if I act as my own agent?
- How much does it cost to use a Buyer’s Agent / Realtor / Broker?
- Working with FHA/203B, RD, VA, Section 184, 203K, Conventional, HELOC, and other types of financing?
- Real vs Personal Property
- Mortgages for Manufactured Homes
- What is a CMA, Appraisal, and AVM?
- Can the Buyer purchase personal property from the Seller?
- Can a mortgage be used to purchase a mobile home?
- What are the basics for handling multiple offer negotiations?
- Are husband and wife required to apply jointly for a mortgage?
- How do I prepare for a cash purchase?
- Do I need flood insurance?
- Where can I research flood maps / areas?
- To whom should I write the earnest money check?
- Should I buy a residential service agreement (i.e. home warranty)?
- Assuming you’ll be obtaining mortgage financing (i.e. not paying cash), here’s a list of steps to buy a house:
- Do I also need an attorney?
- How does the MLS help buyers?
- What is the MLS?
- What’s the difference between a Pre-Qualification Letter and a Pre-Approval Letter?
- When do I apply with a mortgage lender?
- What is Owner’s Title Insurance (OTI)?
- What is Lender’s Title Insurance (LTI)?
- What is title insurance?
- What does a title company do for Buyers?
- How can Harrah Realty help me as a Buyer?
- How much does it cost to buy a home?
- Do you work with out of town clients?
- Can you help me purchase or build a new home?
- Do you work with First-Time Home Buyers?
- What is a lease purchase or an option purchase?
What is a lease purchase or an option purchase?
With an option, you agree to rent a house for say $1500/month instead of the $1000/month rate it would normally go for. The extra $500/mo goes toward your equity, and if you do choose to buy in the agreed time period for the agreed price (at time of moving in, not at a later time — e.g. agree to $120,000 1 year from now), the additional $500/mo goes toward the purchase price. If you choose not to buy, then you just lose that $500/mo.
The initial option contract contains all of the terms of the deal: the monthly rent, the amount that goes toward the purchase if the option is exercised, and the purchase price if the option is exercised.
A lease purchase is similar except it’s not optional to purchase at the specified future date.
These two purchase types are most often sought after by purchasers without access to traditional mortgage financing (e.g. credit issues that are expected to be resolved within 3-6+ months).