Selling Your House with a Lease Option

It’s a buyer’s market, and selling your home can be tough. For one reason or another, many buyers aren’t quite ready to make the leap into purchasing a home. That’s why so many sellers today are renting their homes to individuals who then have the option to buy the home when their lease is up. Selling your home with a lease option is a great way to ease the buyer in and earn a little extra cash in the process.

Here are some tips that can help you navigate the process of selling your home with a lease option:

1) Make sure it’s right for you. While lease options can be beneficial to some, they are not for everyone. Remember that the person who is leasing your home is not required to purchase it once the lease is up, so you may need to start the process over again when it is. You’ll also want to make sure that you’ll be able to keep up with making repairs to the home while it’s being leased, as that will still be your responsibility. If you need the money from your home sale right away, then a straight sale might be a better option.

2) Do a background check. Because you will be responsible for the condition of the house while it’s being leased, make sure you pick the perfect tenants who will make your job as landlord as easy as possible. Find someone with a steady monthly income and good references from past landlords or employers. You can also feel free to have your tenant pre-qualified for a mortgage. Remember that the ultimate goal is to have the tenant buy your home, so it doesn’t hurt to see where they stand right away.

3) Make the contract. Before you get started on the contract, you’ll want to write up a disclosure form for your tenant that will describe any problems with the home that you know of before the tenant moves in. The contract that you and the tenant will sign can be best attained from your local attorney or real estate agent. The contract should include the purchase price of the home, the amount of option money you will collect (typically 2-4 percent of the purchase price), how much of the tenant’s monthly payment is going to be credited toward the option and how long the lease term will be.

4) Get the right insurance. Make a call to your insurance agent so that you can update your policy whenever needed. You may need a dwelling policy now that you won’t be the owner and occupant of your home, and you should also make sure that your tenant has the appropriate renter’s insurance.

5) Sell your home. The ultimate goal is to sell your home to your lessee. Before or at the end of the lease term, your tenant may decide to exercise the leasing option that was agreed upon in your contract. Any option money paid toward the house will go toward the home’s down payment. This can be anywhere between 0-100 percent of the monthly payment, depending on what you stated in your contract. In many cases, the tenant will find that subtracting this amount from the total needed will decrease the overall cost of the down payment and make it easier for him or her to get a loan for the house.

While the real estate market in Chester County is certainly picking up steam, there are still many home sellers who are turning to lease options to ultimately get deals done. If you’re considering this option, work with an experienced real estate agent to make sure you have all of your bases covered.