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Law Office of Marilyn Sullivan

Rent to Buy Lease Option Sample Transaction

Buyer and Seller come together. Buyer wants to buy Seller's home on Main Street, but needs some time to do so. Buyer does not have the down payment and needs to repair her credit after a Short Sale.The Seller wants to sell his home and move onto his next, but feels that his home will appreciate over the Buyer's lease term and would like to benefit from a higher sale price.

The solution is Rent to Buy with the Market Modulated Lease Option

The Seller leases his home on Main St. to the Buyer with a purchase option to be exercised in three years (can be any time frame) for a price to be set by appraisal at that time. The buyer moves into the home and the Seller moves into his next home. When the number of years specified is reached, the Buyer's purchase option commences. At that time, the Buyer purchases the home at then fair market value with his lease option deposits credited to the purchase price. [The Buyer still has the choice not to exercise the purchase option and allow the Seller to retain the option deposits.]

By using the Market Modulated Lease Option, these parties are able to proactively respond to their needs by Buyer leasing the home now but paying a price later determined by appraisal.

The outcome:

Main Street Home
Lease term: 1/1/12 to 1/1/15
Purchase Option commences: 1/1/15
Property value now: $485,000
Appraised value at option time: $565,000
Option deposit paid 1/1/12: $20,000
Monthly rent: $2,000
Monthly option deposit (in addition to rent): $500
Option Deposit credited to purchase price: $38,000

Note: Our lease option form allows the purchase price to be set now or later by appraisal and allows the option period and when it begins to customized to varying need. The instructions prompt you through these choices.