If the mortgage has a "due on sale" clause, which most mortages do...I would not touch that one with a 10 ft pole.

At best, I would advise the buyer to discuss with an attorney and wash my hands of that part.

In the old days....If no "due on sale" I would write up a purchase agreeement and a lease and tie the two together. Today, I think I would just have an attorney do it. 

Eve

I would always, always, always have an attorney draft a lease-purchase agreement, Peter!

Don't shoulder that liability - it's most definitely worth the cost of an attorney drafting it.

I am not in favor of such a transaction. Never done one and have actively avoided the opportunity once or twice.

Do an internet search for "lease to purchase pro con" and you will get all of the informtion you can digest.

I don't.  In fact in over twenty years in this business I have never been involved in a lease-option transaction.  Commonly asked question but quite uncommon here.

B

I have avoided these types of contracts or anything that has added complications. It's kept me out of trouble.

Peter, they never close. That's a big problem right there. Why do the buyers need to lease first?

I do not. That is a rabbit hole I've never gone down.  And I echo what Mike & Eve Alexander said ... I would not touch it if asked ... they would be directed to an attorney to deal with it. 

Great answers. 

Never done it. 

Sorry, they are very seldom done in CA.  I've never seen one.

sorry, in 40 years, I never did one of those...

Your best path is to have an attorney draft the agreement. I have never been a fan!

Have yet to see a lease purchase ever turn into a purchase and the last one I "saw" after the fact, my clients had $30K of damages to their home and didn't recover but less than half. Make sure you have a big, big non-refundable deposit which comes back to the tenants/buyers only if they purchase. And make sure agreements are drafted by an attorney if you move forward. 

Sorry Peter Mohylsky I avoid these like the plague!

Owner wants to sell? The person wanting to lease with option to purchase should apply for a mortgage with the lender of sellers choice to start with. That way you find out up front if they will ever be able to complete the purchase.

Peter,

Check with a real estate attorney on this one.  A

Great question Peter Mohylsky !

Was just reviewing one for AZ.

Check out this link:  https://eforms.com/rental/lease-to-own/

You can choose your own state and export a PDF for free... 

They can be a gold mine for the landlord/seller without a conscience and a crime for the renter/buyer. The buyer "just needs time to fix their credit", but never does. The purchase option comes up, little if any is applied to the down payment and they still don't qualify to purchase, so they either move on or just stay tenants losing what they thought they were putting into the home.  

Unless they are done by close friends or family they just aren't worth it. 

No experience here but have heard plenty about the risks

In ancient times we did this & contracts & ideas have changed. No I really couldn't help. I would honestly talk the buyer out of it - it's slanted toward the owner.

I like to make sure the buyer can actually get a mortgage, BUT JUST needs to save money for down payment and or closing costs. I MAKE them put down a non refundable deposit towards tdhe purchase. I negotiate the lease, then the purchase terms on separate contracts. If they dont buy, deposit is lost and must state they have to be out on XXX date or pay XXX additional. 

Start with a contract.

They don't work in our market - either purchase, or rent.

Cover pets of course, and cover if the tenant should decide NOT to buy, when and how the showings process will go. You want to cover it before, and make sure you cover making sure the tenant has the home "show" ready when they are nearing the end of the lease. 

Peter Mohylsky the best person to help 'us' with this kind of situation is... .

you guessed it right - the attorney.

I wouldn't get involved as only one party will be happy at the end of the lease and the chance of being sued is high.

A purchase agreement evidencing a minimum original term of at least 12 month clearly stating the monthly rental amount and specifying the terms of the lease. 

The terminology differs but you're talking about a "Rent to Own" correct? It all sounds great until the tenant / purchaser finally understands their rent is inflated along with the "agreed" future sale price. Now they're pissed off and it'll take some doing to get them out (legally) before the extra cash flow dries up.

I bought my first house that way in 1989. Unfortunately, that was also the last time I've done one. Memory serves:

Define Payment Breakdown

Rent Amount

Principle/Interest Amount

Balloon Payment schedule.

Final Buyout Deadline.

Seller Financing?

Terms of lease & terms of contract separated.

I use an attorney to help me with these.

This form of financing has become incredibly perilous due to the Consumer Protection Act.  Transactions that involve a occupant buyer places the seller/owner in extreme peril IF the contract creates any control interest in the real estate for the buyer/occupant.

I would advise investors/owners to stay away from any form of financing a occupant buyer.  Should that advise be ignored then make certain the lease and purchase are completely separate, in essence, creating no control interest in the property for the buyer. Otherwise, the knowledgeable buyer will be able to bankrupt the owner. That is the outcome of protecting the consumer for the past criminality of Bank of America.

In Texas we are not allowed to write any lease to purchase language.  Need to get an attorney involved.

Our Association drafted one for us

I have never seen what I would call a good lease to buy contract

Get a very good RE attny.

 Hi, Peter.  

       Absolutely use an attorney.  

       There may be two separate documents... the lease or lease option, and the contract for sale and purchase. 

       And of course, that existing mortgage has to be considered... you don't want to trigger a due on sale clause.