Lease With Option To Buy
REM # A644
By Ilyce R. Glink
Summary: A reader has agreed to offer a lease with option to buy to a prospect with bad credit. Ilyce gives advice on how to protect themselves from an equitable interest claim.
Q: Our house is listed with a local real estate office and the realtor who
has our listing produced a buyer with bad credit.
(article continues below useful
links)
We suggested that the buyer do a lease with option to buy the property.
The prospect buyers are willing to put $100,000 for the option. The property value is $465,000. How do we protect ourselves from an equitable interest claim, in the event they are late on monthly lease payments or fail to exercise the option?
A: It all comes down to what’s written in the agreement. With a lease with an option to buy, the cash that is put down for the option is often forfeit if the buyers decide not to close on the property within the option period.
Since you're getting more than 20 percent of the cost of the property in what would normally be a non-refundable option fee, I think you're pretty safe. If they miss a rent payment, you have a lot of their cash. They probably are not thinking that their $100,000 is going to be non-refundable, however, so this is something to consider when writing up your agreement.
I do think some portion of the cash they put down should be non-refundable.
Since they are leasing the property from you, not purchasing it, they shouldn't
have any claim on the cash that's the non-refundable option fee. If they want
to put down the rest of the cash, perhaps it should go into an escrow account
until the option is picked up.
I think what you need now is an excellent real estate attorney who can draw
up the papers, look at the deal and make sure you're not going to get hurt.
Then, you can close the deal and move them into your home. But make sure you
understand the terms of the deal so you're not surprised down the line.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
Quit Claim Deed Transfers Property Taxes
Quit-Claim Deed Question
Deed in Lieu of Foreclosure Will Hurt Credit Rating
Shopping For A House Online
Selling A Long Term Investment Property
Link to This Article
Like what you've read? Spread the word! You can link to this article
from your website by copying the following code and adding it to
a page on your website:
Copyright ©2001-2007. ThinkGlink, Inc.
All rights reserved. Reproduction of material from any www.ThinkGlink.com pages without permission is strictly prohibited.
Site designed by Walker Sands Communications
