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Is Lease Option an Option? The Risk and Reward for Sellers!

December 26th, 2007 categories: Indianapolis Real Estate News, Indy Home Sellers

LeaseoptionXSmallOne of the not so new  financing terms being offered lately is a lease option. I have discussed the details of a lease option with both buyer and seller clients. I ve also had several buyers who have come by my website searching for more information about the process.

With a slow down in the Indianapolis real estate market this past year, some sellers are considering lease option and buyers who see the advertisements for such have started to ask about the details of a lease option.

As a seller, should you consider a lease option? It really depends on your personal tolerance for risk. If you can handle the risk, the reward may be beneficial. If you are a seller who has little equity and/or too much competition in the current market, a lease option could allow you the opportunity to ride the market for awhile.

Pros: While waiting for the market to return to a more normal balance of supply and demand, your house payment is being made and you have a portion of your equity up front as collateral. Monthly payments are a bit higher than normal with a portion of the payment going towards the lessor s down payment or closing costs at the time of sale.

Cons: The option portion of the contract is only binding on the lessee (seller) and the buyer can decide to not purchase at the end of the lease term, leaving the seller to start the process over again. If the buyer buys the home at the end of the option period, chances are you have come out ahead. Should they decide not to buy and do not maintain the property, you may lose any savings in repairs and deferred maintenance.

My advice on a lease option will depend on if I represent you as a seller s agent or a buyer s agent and your personal goals. Tomorrow, I will discuss the pros and cons for the buyer in a lease option.

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This entry was posted on Wednesday, December 26th, 2007 at 10:11 pm and is filed under Indianapolis Real Estate News, Indy Home Sellers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

  1. Karl Burger said at December 27th, 2007 at 4:36 pm

    Good post. I have found that many people in my market do not understand what a lease option is. Here we are told to advertise them as “rent-to-own” because the term lease option is so unfamiliar to many real estate buyers.

  2. Paula Henry said at December 27th, 2007 at 8:31 pm

    Karl - It is a bit confusing and I should probably write in detail about what a lease option is and what it isn’t. Many buyers believe they can get into a lease option with about the same money down as if they rent. Unfortunately, that is usually not the case. On to more writing:)

  3. Indy Real Estate Talk » Blog Archive » Lease Option for Buyers in Indianapolis said at December 27th, 2007 at 10:30 pm

    [...] a follow up to my previous post about Lease Options, let’s talk about the benefits and risk for the buyer in a lease option [...]

  4. Ashley Gephardt said at January 21st, 2008 at 6:04 am

    We aren’t seeing to many of these being offered by sellers here yet. Buyers on the other hand that can’t otherwise qualify are seeking them out. Which would not be good for the sellers. - Ashley

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