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how does a lease purchase work

  • August 27 2009 - Bensalem
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Answers (7)

Profile picture for Erick Rodriguez
Which side are you on. Are you the tenant or the landlord?
  • October 08 2010
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Aside for the fact that this question is over a year old...

Lease purchase: where an unrealistic seller meets an unqualified buyer. Its all fun and games till a bunch of really nice attorneys make a lot of money off of it later.
  • October 08 2010
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Lease purchase options can be a great way for a Seller to fill a vacant home, and for a potential buyer to find a housing solution.  For a buyer that has lending limitations, such as credit in repair, lack of downpayment funds, or other situations, it can provide a way to lock in a price on a home, while making sure you want to live in a location.
We recommend Sellers and Buyers use attorneys to review the documentation of the deal, and some downpayment or deposit is usually required, but it can be a good situation for both parties.  During the winter months in Northwest Indiana, it can be a good way to get the home occupied, help with expenses, and even help stage the home with the right buyer. 
--Matt Evans, Northwest Indiana, Valparaiso area REALTOR,
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  • October 08 2010
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I personally am an advocate for Lease Purchases.  There are the pitfalls that have been mentioned but I think it is (can be) an ideal situation when it all comes together as meant to be.
It allows a family with some credit issues or no down pmt $ to get into a home they truly love and want to buy and stay in. 
In Arizona (not sure of other states) the contract is whatever you negotiate and agree on - it is all negotiable.  Must be in writing, dated and I would even have the signatures notarized.  So however you put it together in writing is what you have to live with.   BTW best to set the purchase price to be per appraised value at the time the buyer moves forward with the purchase. 
Sincerely,
Celia
  • October 08 2010
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They don't. Run away screaming from them. The problem for a lease purchase is the property may become further incumbered by the landlord/seller. You can pay nearly all of your lease payments only to discover the house has more liens on it than the agreed purchase price and you have little recourse because the property is in the landlord/sellers name.

I better nonconventional route would be a private mortgage from the seller where the property is placed in the buyer's name and then the seller becomes the primary lienholder.

The above is just my personal opinion, and not a legal opinion. For a legal opinion please see a licensed attorney in your jurisdiction.
  • November 21 2009
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If you would like a local attorney recomendation, let me know and I'll be glad to give you his information.
  • November 20 2009
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Usually - the price is determined on a settlement date in the future - example 1 or 2 years - then the owner/seller collects from the buyer a monthly amount - example $1,000 - that is broken down into the lease/rent - example $800 - and the $200 balance is taken off the purchase price of the property.  The terms are determined between the buyer and seller and should all be put in writing and signed by all parties.  It would be good to involve an attorney to make sure all parties are covered properly. 

This is my opinion and not considered to be legal advice as I am not an attorney and you should definitely consult an attorney to protect your interests.
  • November 20 2009
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