Lease-Purchases on the Rise

One way that buyers without enough money to get a mortgage can purchase a home is with a lease-purchase agreement.

Usually, the terms of the deal include a lease and an option to buy with part of the rent going toward the downpayment. The forced savings helps buyers amass enough to buy the house in the specified time frame, usually three to five years.

Cindy Walker, an associate with South Island Real Estate in Melbourne Beach, Fla., recently helped a young couple negotiate such a deal. She received a rental commission for the lease arrangement, and she will get a sales commission if the purchase option is executed.

Some real estate professionals find this arrangement unacceptable, but Walker says, “I look at it as money in the bank."

She offers these tips for anyone contemplating using a lease-purchase option:

Don’t be afraid to ask the seller if the owner would accept a lease-purchase agreement. Sellers might find it attractive once they understand it will generate regular rental income.

Negotiate how much money will go toward the downpayment and whether the buyer or the seller or both will handle maintenance and repairs.

Avoid prepayment penalties. No prepayment penalty increases the incentive to do the deal quickly. In most cases, that’s a good thing from both the buyer’s and the seller’s points of view.