If you have any questions about the lease purchase, leasing option or real estate transaction, please contact us. A rental option is a rental agreement that involves a provision for the tenant to purchase the property at the end of a specified period, usually a year or two. The contract should include the sale price and indicate which portion of the monthly rent, usually a small amount, must be paid at the down payment or completion fee. On the other hand, a land contract is a sales contract in which the owner of the property holds the title and recovers the monthly payments, instead of being withdrawn by a bank or mortgage company. The main difference between a land contract and a leasing option is the buyer`s ability to establish equity in the property. Real estate contracts can be written in almost any way that the seller and buyer accept. There are government laws that need to be respected, but there are many options for the treaty. The difference between a land contract and a leasing option strongly distinguishes these contracts from a standard purchase agreement. As long as you comply with the legal requirements in your country, these are enforceable contracts. However, because they differ from the norm, it may take a little work for an investor to find a seller who understands the difference between a land contract and a rental option. Sometimes sellers give the option of money to their real estate agent as the full payment of the commission.
Brokers are not always involved in exercising leasing options or executing leasing contracts, and you will probably still need a real estate lawyer, even if you have retained the representation of the real estate agent. Agents are not lawyers, and they cannot give you legal advice. Get all the information and do your due diligence as in a regular sale, including the following: The money option usually does not apply to the down payment, but a portion of the monthly rent payment may apply on the purchase price. No one else can purchase the property during the rental option period and, in this case, the buyer generally cannot give up the rental option without the seller`s consent. If the buyer does not exercise the rental option and buys the property at the end of the life, the option expires. The buyer is not obliged to buy the property. Neither a leasing option nor a property contract involves a bank, so they have not incorporated protection into the mortgage lending process. If you are the buyer, hire a securities company to search for data to ensure that the property is free of pledges or other rights before signing documents.
Also make sure that a land contract is registered with the city or county in which you live so that there is an official registration. For the seller, the payment of the option can be treated as a down payment or a first payment of the transaction. The total amount of payments may ultimately contribute to a capital gain or loss, both of which have a tax impact. Rental income also contributes to capital gains.