This might be an approach for a buyer who wants to move into their next property but there is a gap between when they can move in and when they can get a mortgage. Rather than rent and later buy and deal with two moves you might want to consider a lease with option to buy.
The key elements in your offer will include…
- An offer to lease the property with terms specified (amount, time period)
- Option to purchase – this can be added into the lease agreement
- Inspection – can be done as part of the agreement
- Financial assessment can be done as part of the agreement
The option will typically be purchased by the buyer. The dollar amount for the option is negotiable. It needs to be enough that a seller is motivated to take their property off the market. The option is paid along with a rental deposit, prior to taking possession. The conditions of the purchase will be detailed in the option purchase – specifically how long the buyer has to exercise the option and purchase agreement terms. The option amount will be directed toward the purchase if the option is exercised within the agreed terms. Once the option is exercised the normal purchase process is followed with a formal closing.
The amount paid for the option is forfeited if the option isn’t exercised per the agreed terms.
Both parties can work with Realtors through this process.
Some buyers are using the lease with option to buy approach if they have a property on the market and need to wait until it sells before they are eligible for another mortgage. Others are choosing this approach when their financial situation benefits.
I hope this overview is helpful. Let me know if I can help you with the details.
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