Yesterday I rolled things back to the very beginning and explained what lease options are and what they are comprised of.  If you aren't that knowledgeable about lease options that post is a good place to start.  I also promised that I would talk about why a home seller would consider lease options and what the benefits to the seller are.

Higher Purchase Price - Rent-to-own sales typically command a price premium over traditional sales. The buyer is paying extra for the flexibility he receives by not having to do an outright purchase immediately. I will be going into how to price your house as a rent-to-own in more detail later.

Higher Rent - You may be able to charge more for monthly rent in a rent-to-own than you would for just a straight rental. I will cover this in more detail later.

Cash Flow - If your monthly payments are less than the monthly rent, the difference goes into your pocket.

Option Fee - This upfront fee paid to you by your buyer is what secures the purchase price down the road. If the buyer closes on the home, it would be applied towards the purchase price. If the buyer elects to not purchase the home, the option fee is forfeited and still remains yours. Either way you win. If you were to just rent the home, the tenant would put down a security deposit. The option fee is different than a security deposit. A security deposit is owned by the tenant and can’t be used by the owner, except for repairing damages, unpaid rent and other provisions as mandated under state laws.

Eliminates the Burden of the Mortgage Payment - If you have already moved on to your next home and your old house is sitting empty while you try to sell it, then you are saddled with TWO mortgage payments. Hopefully you aren’t in this position, but if you are I feel your pain. Ouch! If the house has been taking a while to sell, you know how fast the money coming out of your pocket adds up. It gobbles up any equity you have at a frightening rate. Placing a rent-to-own buyer that pays that extra mortgage can take away your pain.

Getting Your Home Sold Faster - In slow selling markets, offering your home as a rent-to-own can help you get a buyer into the house much faster. This option will open up your pool of buyers significantly.

Getting Your Home Sold at All - If your home is just flat out not selling for whatever reason, offering it as a rent-to-own may be the only way to get it sold.

Those are some of the key benefits to home sellers for selling their home on a lease option.  Look, I'm not saying that lease options are the perfect situation for every transaction and every home seller.  But the reality is that some home sellers NEED lease options to get their homes sold.  And there are some great benefits for them in doing so.  As a lease option investor or as the seller's real estate agent we can do them a great service by offering them this option.  If you want to learn more about lease options and get training in doing lease options, either as a real estate investor or as a real estate agent take a look at my website for lease option training.

This is a fairly common concern people have when it comes to lease options.  After all, repair costs can really add up if the home is older and needs maintenance or the option period is for a long time.

The answer to this really depends on what type of real estate market you do your lease option deal in and also it depends entirely on what you put into your contract.

In a seller's market I usually have the  rent to own buyer be responsible for all repairs.  This is very convenient for a lease option investor.  My lease option contract will say that the lease option buyer is responsible for all maintenance, major and minor.  However, if I end up having to do any repairs, I'm going to add the cost to the purchase price at closing.  Let the rent to own buyer think through their own possibilities first, but if they still don't know what to do, then send your own maintenance people and recoup the cost at closing.

For example, if the lease option buyer's heat goes out in the middle of a Michigan winter, it's crucial to get that fixed, both for the lease option buyer and to protect the lease option seller.  On the other hand, if the air conditioning goes out in the summer, it's unpleasant but livable.  Do NOT make your lease option buyer unduly fix too much, because if you treat the tenant like an owner then the court may treat you like you provided seller financing instead of  a lease option.  The tenant can claim that they've put so many dollars into the property and the court may make you go through a forfeiture or a foreclosure versus an eviction should the rent to own buyer stop paying their rent.  In most states this would be much more expensive and much more difficult.

In a buyer's market you can put more of the responsibility for maintenance onto the seller.  In a seller's market, I don't want my seller to do anything but be free and clear of that issue.  However, I have to preapprove in writing any improvements my lease option buyers do.

Keep a copy of any letter regarding maintenance in the lease option buyer's record folder.  When a rent to own buyer calls, I record what was said for their records also.  The same goes for maintenance.  I track everything.  If the roof leaks, and someone slips and falls, accurate files will suddenly become very important!