When the real estate market is slow, buyers and sellers can both get creative.  One way to adjust to a tougher real estate market is to lease a Northern Virginia/South Carolina home with the option of buying it.  This way, the lessee/buyer has more of an investment in the property while the lessor/seller's costs are covered so they can move on to another property.  What can you expect when leasing with the option to buy?

First, let me explain what exactly a "lease-option" is.  This happens when the tenant of a Northern Virginia/South Carolina home enters into a legal, binding agreement with the owner of the property to lease it for a certain period of time.  At the end of the agreed upon time, the tenant will have the option to buy the property.  This allows the tenant/buyer to live on the property while saving up for a downpayment and/or securing financing to eventually purchase the home they inhabit.  For the landlord/seller, not only are their mortgage and tax costs covered with the rent from the current tenant, but they also typically can expect to have a tenant who will take better care in the property since it is expected to eventually be the tenant's property anyway.

A "lease-option" agreement comes with three distinct although interactive parts: the lease agreement, the option to purchase the Northern Virginia/South Carolina home and the actual sales agreement.  These can be handled via three separate legal documents that include references to each other or one large, much more complicated one.  Which one will be used is for the buyer, the seller and their representatives to determine.

The lease portion of a "lease-option" is pretty standard stuff.  Each party agrees to a monthly rental amount for a specified period of time.  This typically includes lease items such as a security deposit and late fees.  This will cover the legal rights of both the tenant and the homeowner for the period of the lease.

The option period takes place after the official lease period has ended but before the actual sale of the Northern Virginia/South Carolina.  It may be as long as the lease period (ie, 1 year lease with 1 year option to follow) or longer (1 year lease with 2 year option to purchase).  The option agreement will spell out how long of a period of time the tenant has to decide whether they want to actually buy the property, how much will be paid for the option (typically a fee added onto the monthly rental amount), how the option will be exercised (usually a written notice of some sort) and what happens if the tenant does not decide to buy the home.  If the tenant decides not to buy the property, the option fees paid are normally not refunded.

The purchase agreement allows both parties to come to an agreed upon price as well as terms on the Northern Virginia/South Carolina home in question.  A specific amount may not have to be referenced in the agreement, however.  Both parties may instead decide that the price will be determined by the consumer price index or another real estate valuation method in place at the time of purchase.

Before entering into a "lease-option", find out what to expect when leasing with the option to buy.  Speak to your lawyer or financial advisers.  Feel free to ask any questions you have and don't sign any documents until you are completely sure you understand them.  A "lease-option" is a binding legal document that shouldn't be entered into lightly.  An informed consumer is a happy consumer.

Gene Mock, your Northern Virginia, South Carolina and Washington DC real estate specialist

Originally posted on my Northern Virginia Homes blog here: http://northernvirginiahomes.net/2011/10/27/what-to-expect-when-leasing-with-option-to-buy/.