The money in the option is not refundable. No one else can purchase the property unless the buyer is late and the buyer generally cannot give up the lease without the seller`s consent. Buyers are often responsible for the maintenance of the property and the payment of all expenses related to its maintenance over the life, including taxes and insurance, and are contractually required to purchase the property. A leasing option works very similarly to a lease purchase because it consists of two contracts and theoretically allows the tenant to acquire the property in the end. However, the tenant does not sign a sales contract, but an option contract (“option contract”). There are many reasons why someone wants to rent a house with the option to buy it later. At the end of the rental period, the tenant/buyer has the opportunity to purchase the house. The lump sum and rental credit from the original deposit will only be released to the buyer in the form of a down payment on the house, if the tenant/buyer decides to buy it. The tenant/buyer is responsible for guaranteeing the mortgage required to complete the purchase of the house. Monthly payment – How much the tenant pays each month. Rental credit – How much monthly payment the tenant will make to the eventual down payment of the property at the end of the tenancy agreement.
Tenants are strongly advised to create a trust account to ensure the security of their rental credit. Duration – The duration of the lease. Usually 2 to 3 years or more. Real estate value – The blocked sale price of the property. Tenant buyers and sellers generally agree to maintain the same real estate value despite changes in the home market. Terms and Rules – This section deals with other details of the lease, such as property taxes, home repairs, owner`s association fees, etc. The buyer asks for bank financing and pays the seller the full amount at the end of the life. While the option money generally does not apply to the down payment, part of the monthly rental goes towards the purchase price. For this reason, the monthly rent is generally higher than the fair rental value of the market.
In the United States, when loans are applied at a purchase price, the contract becomes a financing contract and these contracts have been identified as predatory credit agreements under the Dodd-Frank Act.