An option to purchase agreement is a contract between a buyer and seller, which gives the buyer the option, but not the obligation, to purchase the property at an agreed upon price, prior to the maturity date of the option.
A lease option (more formally Lease With the Option to Purchase) is a type of contract within which a property owner and a tenant agree that, at the end of a specified rental period for a given property, the renter has the option of purchasing the property.
A lease option is different from a lease purchase, in that a lease purchase binds both parties to the sale, whereas in a lease option the buyer has the option, but the seller does not.
The mortgage and title deeds of the property stay in the sellers name, until the sale goes through at the end of the specified rental period. Any mortgage on the property is paid by the buyer, either to the seller, or directly to the mortgage lender, during the rental period. The mortgage lender would allow a third party to be given authority to make payments and manage the mortgage account in this situation.
With a lease option, the terms are completely flexible and are created to suite both the seller and the buyer. Once the terms have been agreed, the contract is then drawn up by a solicitor, making them legally binding.
- A higher purchase price can be agreed, as opposed to one which could be offered by the quick sale cash buyer. In many situations, the full market value is agreed.
- The transaction can take place swiftly and the owner can be freed from the property a lot sooner than anticipated.
- Properties which have either negative equity and/or mortgage arrears, are very commonly sold using a Lease Option. This is due to a Lease Option being the most effective way of selling a property at market value, thus, enabling the seller to get enough value to be able to clear any debts owed on the property.
In this case, the contract would be void and the seller would take the property back.
The seller is within their rights to extend the rental period, if so wished. A higher purchase price could be agreed, or the property could go back to the seller. Any mortgage payments made by the buyer during the rental period, would not be refunded and so, in retrospect, the seller is not out of pocket.
To find out how you can benefit from the revolutionary Rent To Buy scheme, contact us now
A Rent to Buy scheme is a very simple way of helping match property owners looking to sell, with tenants who aspire to get onto the housing ladder.
Because lenders are relucant to lend and demand ever increasing deposits, millions are trapped in 'Generation Rent'. As a result there is a tremendous demand for Rent to Buy properties.
If you're wanting to sell your property, but don't want to risk a short term tenant who may cause damage or miss rent, Rent to Buy scheme is your perfect solution. Rent to Buy has been endorsed by the Housing Minister as a solution to meet the current housing needs.
It enables you to benefit from rental income now and acheive a sale at the full asking price, which will complete in the future. You can 'let and forget' because the tenant will remain in your house until they buy whilst taking care of repairs for you!
Rent To Buy is perfect for anybody looking to sell without having to slash the price drastically. Plus you will be giving a first time buyer a helping hand to get onto the housing ladder.