Rent to Own Explained

What is a Lease - Purchase contract?

General definition:

What is a contract?

What are the key elements to a binding real estate contract?

Offer and acceptance: Original signatures with no alterations to the contract. If the original offer is marked up and initialed by the party receiving it, then signed, this is not an offer and acceptance but a counter-offer. Any final agreement should be reduced to a final writing and signed by both parties.
Consideration: A bargained for exchange of something of value. Money is the most common form of consideration, but a promise to perform (i.e. a promise to pay) is also satisfactory.
In writing: A real estate contract must be in writing and it must:
- Identify the parties: The full name of the parties must be on the contract.
- Identify the property: At least the address, but preferably the legal description must be on the contract.
- Purchase price: The amount of the sales price or a reasonably ascertainable figure (an appraisal to be completed at a future date) must be on the contract.
- Signatures: A real estate contract must be signed to be enforceable.
- Legal purpose: The contract is void if it calls for illegal action.
- Competent parties: Minors, mentally impaired, drugged persons, etc. cannot enter into a contract.
- Meeting of the minds: Each side must be clear as to the essential details, rights, and obligations of the contract.

What is a Lease contract?

What is an Option contract?

What is a Lease - Purchase Contract? A Lease - Purchase contract combines a basic lease contract with an option to purchase contract.

The tenant/buyer pays to the landlord/seller a nonrefundable option deposit that is applied to the purchase price of the home.

The prospective buyer offers the owner a sum of money so the owner will keep the property but agree to sell the property to the buyer at a later date. During the term of the lease, but before the option expires, the tenant/buyer has exclusive right to buy the home under the terms to which both parties have previously agreed.
The tenant/buyer then pays to the landlord/seller rent to compensate the landlord/seller for the tenant/buyer's use of the property. Rent payments are usually made on a monthly basis. Rent payments are usually made on a monthly basis. A portion of that monthly payment is often applied to the purchase price and/or the down payment of the home.

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