The ‘residential lease with an option to purchase’ is a kind of contract that is employed in both fields of residential and commercial real estate. Under this agreement, the tenant and the property owner agree that at the conclusion of a predefined rental duration, the tenant has the leeway to purchase the property altogether. It is signed subject to the landlord-tenant lease laws that exist in each state. These rules are further augmented by the real estate commission’s rules, which vary from state to state. The jurisdictions typically require the parties to disclose certain forms and attach them during the application process.
Lease agreement templates (with an option to purchase)
It is obviously impossible to write a good ‘lease with an option to purchase agreement’ without the appropriate guidance in that sphere. That is why making use of the ‘residential lease with an option to purchase templates is very essential in the process. You can access these from below easily.
Agreement Templates (by State)
How Lease with an Option to Buy Works?
As stated, this lease agreement empowers the buyer to purchase the property at the end of the lease period. He is not bound by that decision, though. Whether or not to buy the property is purely left to his discretion. The property owner is nonetheless obliged to sell the property under the terms that are stipulated in the agreement. The agreement is processed in the following manner:
Step I: Negotiate the Rental Agreement
As is the case with any transaction, it is necessary to negotiate it first and foremost. In your negotiations, you should determine the following:
- Monthly rent ($)
- Terms of references
- Security Deposit payable
- Utilities and services provided for
Step II: Determine the Option to Purchase
Next, determine the option to purchase. This entails ascertaining the following:
- Purchasing price ($)
- Down payment
- Terms of the option
- Option fee (if applicable)
Step III: Carry out a Tenant Background Check
Just like is the case with other agreements, the ‘residential lease with an option to purchase’ has to be submitted through a duly filled application form. Contained in this application form are fields that extract information concerning credit ratings, general background, and criminal history. You may consider leveraging the intervention of the background check service providers at this stage like:
- Sex offender search
- U.S. National Directory
Step IV: Verify the Income of the Tenant
You now have to verify the income of the tenant. These you will do through:
- Bank Statement (for the last 2-3 months)
- Employment verification
- Pay Stub (past 2 weeks)
- Tax Return (past 2 years)
Step V: Make a Decision
After verifying the income levels, you should now make up your mind whether to admit the tenant into the program or not. If you opt for acceptance, you should schedule a meeting with the tenant-to-be.
Step VI: Sign the ‘Residential Lease with Option to Purchase’
Follow the fruitful meeting you have had with signing the ‘residential lease with the option to purchase.’ The signing has to be accompanied by the following:
- Access codes to the property, i.e., keys, PIN codes, fabs, and so on
- Mail access (In case a mailbox exists on the piece of property)
- 1st month’s rent
- Security deposit (if applicable)
- Prorated amount (applicable if the tenant moves into the property before the start date)
- Other fees, e.g., pet fees, garbage disposal e.t.c.
Step VII: Move-in
After signing the agreement, the tenant now moves in. This is followed shortly thereafter by activating the tenant’s ‘right to purchase the property.’ It is at this stage that the two parties now enter the purchase agreement.