:help I am a real estate agent in Pennsylvania…I know you guys hate agents. As you all know, agents aren’t exactly experts in investment property so bare with me please…What’s the difference between a lease option and a lease purchase? They seem to be used throughout this forum interchangeablly. Is there a difference? If it’s a lease purchase isn’t it still going to be contingent on financing etc. still allowing me to walk away. When I assign the lease option over to the tenant buyer, doesn’t that mean that he can now buy it at the price the seller and I agreed on? Where do I make the equity in the property if the t/b is buying for the same amount I am? Also, as an agent, am I going to be breaking some law if I do a lease option and then assign to a t/b?
If you are acting as a realtor, you are going to make a commission. If you are acting as an investor, you disclose you are a realtor and are not acting as one and that you are doing the transaction to make a profit. Check in your State, but as a Realtor you cannot do an assignment, you would have to be doing it as an investor. Good luck.
I’m a PA agent as well so I can help you a bit. Lease option and lease purchase are used interchangeably. It refers to two documents: a lease, and an purchase option agreement. The lease allows the person to rent the property. The purchase option agreement allows the leasee to buy the property under certain conditions during the lease period. To make a profit, you should come to a different agreement with your TB with regards to the purchase price. And no, you aren’t breaking any laws when you enter into a lease option yourself and then assign it, or sublet to someone else. But in PA you must disclose that you’re an agent. I recommend you put that fact on every piece of paper, in bold lettering. Hope this helps. Good luck with your investing!
Thanks lady and gentleman…great help! :smile
The difference between Lease Option and Lease Purchase is with the Lease Option the tenant buyer have an option not to buy in other word they are not obligate to buy (of course they will loose their option money.) on the other hand the Lease purchase is the tenant buyer have to buy the property.
This must be an extremely rare contract. How would you enforce the purchase? especially when the point of a lease option revolves around the tenants lack of means to get into conventional financing
There is no difference between a lease option and a lease purchase.
With a lease purchase, it’s my understanding that you’d have the same enforcement recourse as a person who is selling a house using a standard purchase & sale agreement. In other words, not much. Like you said, can’t make someone get qualified for a mortgage, and can’t sue for specific performance so as AJ290 says there’s essentially no difference. It’s more psychological than anything (makes the buyer believe that he/she is “obligated” to buy).
I would be inclined to use a lease purchase agreement when I’m selling, and a lease option agreement when I’m buying.
Here’s the thing…they’re both used interchangeably, but they’re a little different according to About.com. I’m not sure any of it matters. http://homebuying.about.com/od/financingadvice/qt/091007_leaseopt.htm
My question is that, if you’re going to “force” a person to buy at the end of the lease, then why not use seller financing in the 1st place? Foreclosing is a pain if they can’t get qualified either way.
Technically a Lease Option is a Lease combined with an Option to purchase. While a Lease Purchase is a Lease combined with a Purchase agreement.
I’m with you Dee, might as well just do seller financing if you want to try to force the sale.
I prefer to set up my deals so that I don’t really care what happens. If they buy I make money. If they don’t buy I make money.