A WAY TO BUY TIME

A client recently had me evaluate a house she owns that had been initially on the market for sale with one brokerage and then for lease with another, but neither effort coming to any avail. Based on preliminary analysis, the pricing didn’t seem to be far off on either count, and the data suggested instead that perhaps having a single brokerage market the home simultaneously for sale and for lease might make for a more coherent and effective campaign with a broader scope of possibilities. 

After taking on the project, we improved the online presence for both the lease and sale campaigns, and to additionally boost the visibility and response rates, we also promoted the idea of a Lease Option. Since listing the home, we have received a steady flow of showings with the majority of serious inquiries from people wanting to explore doing a Lease Option, with two different parties currently considering this route. 

The party closest to making an offer likes the home and they don’t like the prospect of having to move twice if the place sells to somebody else but they aren’t yet ready to buy. Coming in with a Lease Option will enable them to lease the home with terms agreed upon for the eventual purchase while they prepare a home they own elsewhere that they need to sell in order to have the down payment. I’ve seen other Lease Options allow time for different sources such as a bonus or an inheritance to come in, and some may provide for some or all of the rents to go towards the purchase helping accrue more up-front funds over time.

The Lease Option consists of three different contracts, namely the Lease Agreement and the Purchase Agreement, tied together by the Option Agreement. Generally, a property owner isn’t willing to pin their hopes to a single party for an extended period without additional assurance of serious intent. This is addressed by the Optionee paying a non-refundable Option Fee for the rights to purchase the property at the agreed price for a period of generally not longer than a year. The amount of this fee varies but commonly comes to between 5 and 10 percent of the price per the Purchase Agreement.

Paying tens or hundreds of thousands of dollars upfront for the rights to buy the property can be a reckless proposition without due diligence done before handing over the money. For this reason, it is advisable for the parties to run their disclosures, property investigation, appraisal and loan contingency timelines as if the property is being sold today before they commit to moving forward or even moving in. This helps mitigate the likelihood of unanticipated factors negatively impacting the desirability of the property or the Optionee’s ability to complete the purchase due to things they could have confirmed before taking the leap.

Depending on market conditions as we move into 2026, we may well see an increasing number of homes being offered with the alternative of acquiring them under a Lease Option, and this will continue to help open up possibilities which may not otherwise exist.