My article for the Tennessee Tribune June 26 -July 3, 2008

A lease purchase contract or lease option contracts is a form of real estate purchase which combines elements of a traditional rental agreement with an exclusive purchase option of a home at a future pre-determined date. These types of contracts are commonly used when a buyer wants to purchase a home, but due to credit issues would not qualify for a conventional, FHA or VA mortgage financing. Since obtaining financing for a home is becoming increasingly difficult with lending changes, a lease purchase option is a great way to take advantage of the above average home inventory in Middle Tennessee.

Usually, the buyer chooses the home and seeks a seller to serve as an investor. The buyer then agrees to a lease period which typically ranges from 12 to 24 months. During this time the buyer has the exclusive right to purchase the home at a previously agreed-upon price. The buyer pays to the seller a non-refundable option deposit that is applied to the purchase price of the home. The buyer then pays to the seller a sum that is typical to the rental amount, of which a portion of that monthly payment may or may not be applied to the purchase price of the home, but covers the mortgage amount owed by the seller.

Should the buyer have a change of heart and decide not to or is unable to purchase the house, the buyer and seller can agree to extend the option period, convert the lease purchase contract into a traditional rental agreement, or end the contract with the would be buyer moving out and seller seeking other buyers.

If you think a lease purchase option is for you, make sure you a hire a Realtor® to market your home as a lease purchase. Untraditional marketing methods are used to find a buyer interested in participating in a lease purchase. Participants in a lease purchase should also hire a real estate lawyer to draw the documents and explain each parties rights, including those of possession and default consequences

Denise J. Beard is a Real Estate Broker with Crye-Leike, Realtors in Nashville, serving the Middle Tennessee area. She can be reached at 615-373-3456 or at www.denisejbeard.com. If you have a real estate question or a topic that you would liked covered, please e-mail Denise at denise@denisejbeard.com.