How to Sell a Home by Lease Options

There may be several reasons why someone would pursue selling him home by lease option. Perhaps selling the home the traditional way has not been successful. There might not be enough equity earned, especially in slow real estate markets, to cover all fees and costs incurred when selling. By setting up a lease option, you are generally able to get more as a sale price, incur monthly income and potentially get yourself out of a financial bind.

Instructions

1. Obtain a contract. Having a contract in place is vital to protecting both homebuyers and homesellers. By using a professional, such as an attorney, to help you with the contract, you can ensure that the contract is legal and binding. Within the contract, be sure to identify selling price, option fee, length of the contract, who is responsible for repairs, if improvements are allowed to be done by potential buyers and the amount of monthly payment and due date. Also, it will be important to note what percentage of the monthly payment will go toward the purchase price.

2. Start advertising. You will get many calls on a lease purchase, so be ready. Make sure that the home is prepared to show, clean and in good repair. Keep an appointment book handy, or hold an open house to draw all buyers out during a certain time frame. When showing the home, hand potential buyers a flier, and include what you are asking for in terms of selling price, monthly payment and option fee or down payment. It is best to let buyers know up-front, to avoid wasting everyone's time. If you are negotiable, let them know that as well.

3. Approve a buyer. Once you have a buyer, or buyer is interested, it is time to approve. You may want to consider obtaining a credit check on your buyer, or a criminal background check. These cost money, but may end up saving you lots in the long run. Once you approve your buyer, walk through the home with him and document anything that needs repairs and determine who will complete them. Take photographs to file away as well, in case you need proof of condition later on.

4. Sign all paperwork and file it away in a safe place. Collect an option fee, or downpayment, a predetermined dollar amount that is nonrefundable should buyers choose not to buy. Typically, this is between 1 to 5 percent of the selling price, but is negotiable. If the buyers choose to buy at their end of their lease, this amount is credited to the selling price.

Tips & Warnings

• Be sure your contract is legal and binding in the event of a problem during the lease.

• Keep good records of all transactions and payments, either on a computer or in a file folder.

• Visit an accountant to talk about tax implications.

References

• Lease To Own Information