CONFUSED! Please Help.

Ok just when I thought I was starting to understand all this stuff, I am now very confused.

Do I have this right:

OPTION: Pay the seller a small fee (like$100) for the option of buying the property at a designated price in a designated amount of time (such as 3-6 months). Then find a buyer with new owner financing to scoop up the property.

LEASE OPTION: Pay the seller a small fee (like$100) for the option of leasing this property to a another party on a “Rent to Own” basis. The Buyer gives me a Down Payment, pays monthly “above-market” rents for the duration of the Option Agreement (1-6 years), and then has the option to buy the property outright for the agreed price…which is always higher than the price I agreed to pay the seller.

My confusion comes in when I start reading terms from different sources…such as:


Is a “Purchase Option” any different from a “Lease Option”???
If so, how are they different?

And how does a “Lease Purchase” fit into all this?


Howdy Kmosher:

It can be confusing. As option on anything gives you the right to buy but is not a promise to buy.

Usually a lease option just means you lease someone a property and give them an option to but at whatever price. It can be at a price to be determined later by appraisal or a set price at the time of the option. The lease option below is not correct.

Sometimes you can have a sandwich lease option where say you get a lease option from an owner and then turn around and do another lease option with another buyer. These can get kind of messy if things go wrong with the payments etc.

In a lease purchase agreement there generally is a promise to buy and still can be confused with an option. A lease purchase could be considered as a lease with a sales contract attached and the closing set for 12 months or so into the future.

In some leases ( commercial) you may see an option, something like a 5 year lease with 2 5 year options. This is for the security of the tenant that may want to stay longer than 5 years but wants the option to decide later. Here again the option and not the responsibility.

I hope this helps straighten it out for you. It can truly be confusing. LOL