How does a lease with option to buy work?

Question

I want to sell my condo to a friend , she wants to give me a down payment and needs a couple of years before she buys ....

Answer 1

Hi Esther,

A lease option is a good way to sell right now, but it is important to protect yourself when doing this.

You will basically have two contracts (this is how I do it) one is a regular HUD approved lease and the other is a purchase contract. It is important to never write anything down as a "security deposit" since you are not renting it out. It is best to leave anything that says "security deposit" blank on the lease and instead put it down as an "option consideration" on the purchase contract. Get as much option consideration as you can - the more they put down the more emotionally commited they are to buy the house - since the option consideration is NON refundable.

Remember, you are giving up your right to sell the house to anyone else for the length of the option and allowing them to lock in the price at todays market value and helping them get into a nice house that they couldnt otherwise buy. That is why the option fee is non refundable.

Only about 1 out of 3 options actually close so be prepared. The good news is that in two or three years the market will be much better and you can sell it for more than you are asking now ;p