How does Lease-to-own typically work?

In My Humble Opinion
1

Dunno if this is GQ or IMHO.

How does “Lease-to-own” in housing typically work?

You lease a house, obviously, for a set term. Then, at the end of that term, you can buy the house.

BUT…

do you typically have an exclusive option to buy the house, which the seller cannot get out of? If the seller CAN get out of the option to sell, what good is lease-to-own? (since, effectively, all the equity you have built up will go down the drain if he can merely break the deal and sell it to someone else at the original price)

if you DO have an exclusive option to buy the house, is the option typically at the market value, or do you put some “equity” into the house and have the option to buy at slightly less than current price?

And yes, I am looking at a house with a lease-to-own option, I just have not negotiated that yet, since I want to know if their offer is out of the ordinary.

Your experiences?

2

I’ve never done this, but my understanding is that you contract to buy the home, say, in a year, and during that year, you lease from the owner. A portion of your “rent” is applied toward the purchase of the house.

As far as breaking the contract, I have no idea. If I was to try this, I’d talk to a real estate lawyer first.

3

That was how I bought my house. I still had to come up with over $12,000 to buy the house and that was after 10 years of renting the place. In that 10 years the total put away for the down was only about $5400. My suggestion, rent a cheaper place and put the difference away in savings. You will build up the necessary cash to buy a house much faster. And yes, if a qualified buyer comes along before the end of the lease period, you could be forced into a buy it now or move situation.

4

We leased our house for a 6-month term, after which we bought it. The work we did on the house (painting–inside & out–new shutters, etc.) counted for the down payment. We got our house for a fair amount below the asking price, enough that we had equity in the house the day we closed. It worked out great for us; gave us a place to live and settle into while we saved for the closing costs.