BUYERS' CORNER

Can’t Afford A Down Payment? Consider A Lease-Purchase

A way to take immediate possession of a home and spending little or no money up front is with a lease-purchase. Some sellers, particularly those whose need for immediate cash is not urgent, are willing to offer their homes on such a basis. In those cases buyers usually make a small down payment, which is later applied to the purchase price, and then make regular rent payments for a time agreed upon between both buyer and seller. A portion of each month’s rent, often one-third, is also applied towards the down payment. This option allows buyers with little up-front cash to immediately get into a home, and helps sellers to find buyers that might not otherwise qualify for a loan. Properly structured they can be a win-win.

However, lease purchase also offers some pitfalls. The owner could be facing foreclosure, bankruptcy, or suffering from other financial woes. It’s recommended to have an attorney draw up the lease-purchase agreement and to have an attorney or other escrow agent hold the earnest money deposit. Purchasers considering this option should also confirm with the mortgage holder, if there is one, that all mortgage payments are current and that the account is in good standing.

Those considering a lease-purchase should consider the transaction the same as a regular purchase and should take the same precautionary measures, that is: They should get a home inspection, have the property appraised, order a title search, and have the sellers complete a disclosure statement.