Rent To Own/Lease Option Fees

LEASE OPTION/ RENT TO OWN SERVICES

A Rent to Own Lease Option is the lease of a property with the option to purchase it. The Transaction is coupled with a non-refundable Lease Option Deposit which is typically credited to the purchase Price if the Buyer exercises the option to purchase and is retained by the Seller if not. The Option period is frequently one to three years during which time the Buyer saves up the down payment needed to purchase. The Seller can either provide Seller Financing for the Sale, if willing and able, or the Buyer can obtain a loan. 

The The Rent to Own Lease Option is document heavy(a combination of California Assn. of Realtors (CAR) forms and my own) and consists of two phases.

Phase 1

1.   (optional) Purchase Agreement

2.   Option Agreement

3.   Lease.

4.   Memorandum of Option to be recorded

Phase 2

5.   Exercise of Option

6.   Release of Option

7.   (optional) Seller Financing Addendum/Note & Deed of Trust to be recorded 

                                                                          DOCUMENTS

The Option Agreement gives the potential buyer the right to purchase based on the purchase agreement terms (below). A non-refundable (typically) option deposit is made which is a credit to the purchase price if the option is exercised. 

The Purchase Agreement states the terms of the sale. Performance terms are suspended until the option is exercised, if it is. 

The Lease contains the terms the property will be leased at until the option is exercised or expires and (typically) has an extra monthly non-refundable payment that goes toward the option deposit.  

Memorandum of Option (optional) is recorded on the property to protect the buyer from having his option disregarded in a sale. $395 extra now 

Exercise of Option signed when Tenant exercises option to purchase. 

Release of Purchase Right if Option is not exercised.  If a Memorandum of Option was recorded, $350 extra to record the Release due after non-exercise of option. 

Seller Financing Addendum/Deed of Trust/Note: if seller will be financing the purchase upon exercise of option. $850 extra [$350 paid before exercise, $500 after exercise] 

FEES

I typically represent both sides in a transparent transaction where all communication is by email with all parties copied. I can represent only seller for a reduced fee (I do not represent only the buyer as the document set needs to be the one I offer).   

I handle both sides for $5825 plus extras if the option is exercised.  $4200 plus extras if not.  Half of $4200 is paid when the Engagement Agreement is signed, the remainder when the Purchase Agreement, Option Agreement and Lease are prepared.  

I then email all parties when the option is to be exercised, and the purchase terms are carried out in escrow.  If the option is exercised, $1625 plus extras is paid upon exercise.