Monthly Lease Payment Does Not Reduce Lease Option Selling Price

6 Replies

Very often I have tenant buyers automatically thinking that the lease payment they make every month while the are living in the Rent to Own property while they are working on obtaining a mortgage loan goes toward reducing the selling price of the Rent to Own property. 

I would appreciate hearing from other lease option folks about how they explain this aspect of lease options.

@Robert Burns This should have been addressed prior to signing the lease. They can't assume that they will be getting a credit at closing. I would stand behind the lease. And from what I have seen the leases that offer a credit tend to be priced above market rents to avoid the renter/buyer from backing out. I would be reluctant to provide a market rent and a credit unless I felt it was in my Interest. Also did they provide a non refundable (lease option) deposit. Lease options are negotiable, if it wasn't addressed then why would they assume they are getting a credit.

As stated the contract is negotiable. I bought a house with a lease/purchase option and a portion of the rent went to the down payment. The purchase price remained the same and was stated in the lease agreement. Yes the rent was a little high for the neighborhood and if I walked away I was not entitled to any refund/rebate. 

Never do a Lease Option using one contract.  The lease and the Option are 2 completely separate agreements, with no mention of the other one in each contract.

Never give rent credits.  If the tenant/buyer wants get credits, just reduce the cost of the property by the total amount of "would be" rent credits.  The end result is the same for the tenant.  The seller/landlord retains full value on the lease payments though if the option agreement is never exercised. 

Originally posted by @Dale Ferrell :

As stated the contract is negotiable. I bought a house with a lease/purchase option and a portion of the rent went to the down payment. The purchase price remained the same and was stated in the lease agreement. Yes the rent was a little high for the neighborhood and if I walked away I was not entitled to any refund/rebate. 

 A Lease/Option isn't the same thing as a Lease/Purchase.

"Option" gives the tenant/Buyer the "option" to buy.
"Purchase" doesn't.  The Purchase agreement just states the tenant/Buyer agrees to buy the property by a certain date for a set price.  There is no option to do it.