Why lease option?

Lease option is generally known as a lease with the option to purchase. In other words, the buyers pay for an option that grants them the right to purchase the property at an established price within a certain time frame, usually three to five years. The option money is not refundable. Lease option is different with lease purchase. Lease purchase binds both seller and buyer to the sale while the buyer has the right but no obligation to buy the property in a lease option.     

The buyer is engaged in a lease option transaction for several reasons. First, they may not have enough capital in paying house down payment probably due to some credit issues or financial problems. Second, they might have been transferred immediately to another company located overseas or other states and they need to sell their current home before they can buy a new one in the city to which they are relocating. They can only afford to rent a house before they sell their existing home. Third, they want to carry out a neighborhood check before they decide to buy the house. For most people, buying a home can be a single largest investment decision they will ever make in their whole life time. Hence, they will not want to make any mistake in purchasing the house. For safety purpose, they will first evaluate the crime rates, noise, transportation facilities, traffic, schools and public services that will be found in that area before deciding to buy the house. Next, the buyer may be uncertain about the overall property market. Lease option will then offers them the best insurance when they doubt whether the house prices will fall or rise in the future. If the property worth much more than the option price during the option period, the buyer can exercise the option to buy. However, they will choose not to exercise the option even after the option expires if the house has fallen in price.