Lease Purchase / Options / Land Contracts

WHAT IS THE DIFFERENCE BETWEEN A LEASE PURCHASE, A LEASE OPTION, AND A LAND CONTRACT?

LEASE PURCHASE: There are many variations and payment structures however typically a lease purchase is a contract that includes both purchase contract and a lease where the buyer agrees to purchase the property by X date. This is often a situation where the buyer expects to be able to purchase once they can get financing. These work well under the right circumstances but are not for everyone. Many lenders will generally expect to see that the buyer has been paying market rent. Bottom line if you can't get financing these may be a good option but talk to a lender first.

LEASE OPTION: A lease contract where the buyer is given the option to buy during X timeframe. There are many arrangements and we would advise talking to an attorney before entering into either agreement.

LAND CONTRACT: When you buy a house you typically get the deed, if you finance the purchase you take a mortgage that promises the house as collateral for the debt/note. in a land contract typically you get the deed only after having made all the payments or having completed the purchase. These deals are typically risky for buyers since they can typically be simply evicted for missed payments up to a certain point in time. Check with an attorney before entering into this type of deal, and make sure the deal gets recorded! (We have come across a few situations where the owner had a land contract went into bankruptcy and the buyer was left hanging)

SELLER FINANCING: If you can't get normal financing you can always ask the seller if they are willing to be the bank. Obviously the seller  normally needs to be in a very good position to even consider this and have reasonable incentive.