lease to purchase Vs. owner financing

2 Replies

We have a commercial property in Alabama, which a buyer wants to buy.

The buyer is ready for both options of lease to purchase or purchase with owner financing.

We are debating what would be a better choice to get the property back for us in case the buyer defaults.

Is it easier and quicker to get property with lease to purchase or owner financing with lien? 

@Rahim Pir , a lease option is like a stock option.  The option buyer has an opportunity to buy at a specific price within some period of time.  Title does not change hands until the buyer exercises the buy.

In an owner finance situation the deed changes hands.  If there is an issue, a foreclosure will need to happen.

As an FYI, many lease/options never close.  If that happens, you get to keep your option premium with no recourse.  

Hi Rahim,

I agree with Alan here. 

Depends on the laws of your jurisdiction, but if you have a lease with option to purchase, the buyer cannot purchase the property from you - and the deed will not pass - unless he/she fully performs all the requirements of the lease-option and duly exercises the option.

Under the seller financing scenario, if buyer defaults you should be allowed to foreclose and take back the collateral - that is the real estate.

The efficiency, ease or challenges of doing that will turn on the nature of secured lending and foreclosure laws in your state.

Probably worth a few hours of your attorney's time to explain the pros & cons of these alternatives under your particular state laws.