Lease Option: an alternative means to sell a property on a tough market
Property is often a secure investment, but like all investment; it is not 100% guaranteed to give a good return and is not totally risk free.
The challenge to any property investor often comes when they are trying to sell their property investment. If it is a good property then you can easily turn your asset into cash. However, there are instances when one is faced with a property that is difficult to sell. On a tough market, oftentimes most sellers are forced to accept a low price.
However, instead of joining the bandwagon you can make your property stand out by offering something more enticing for buyers. It is similar to the technique used in selling consumer goods such as "take it home today and pay no interest for 12 months." Instead of thinking twice before buying that new TV, the merchants makes it more affordable that it is easier for the buyers to decide to "buy it now". I remember some friends opting to buy their furniture and white goods from this merchant because of these type of payment options even if they have to pay a bit more. What matters is they can afford the monthly repayments instead of paying one lump sum.
The lease option works out in a similar fashion. You offer more options for the potential buyer to buy your property. You make it easier and more affordable (without necessarily sacrificing the selling price) for the buyer to purchase your property.
During a slowing market, it is advantageous for the sellers to use this option to make it easier to get a buyer for a property. On a booming market, it is more advantageous for the buyer to purchase using a lease option because they can build equity in the property without taking any mortgage.
However, depending on the scenario it can be a win-win situation for both buyer and seller. It is best that both parties consult a lawyer before signing any agreement to make sure that both parties understand their rights and options.
Here is a link to understand lease option more with an easy to understand sample computation that illustrates the difference of an ordinary lease to a lease with an option to purchase agreement.
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POSTED IN: Selling a Property
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