Should You Consider Selling On a Lease Purchase Agreement or Land Contract

If you're trying to avoid home foreclosure, and selling your house outright seems to be too difficult, then perhaps a lease purchase agreement, or land contract is what you need.

Should You Consider Selling On a Lease Purchase Agreement or Land Contract

If you're trying to avoid home foreclosure, and selling your house outright seems to be too difficult, then perhaps a lease purchase agreement, or land contract is what you need. Lease purchase agreements aren't anything new. In fact, they've been around for many years.

With a lease purchase agreement (also known as a land contract or lease option) you find a tenant who agrees to lease your home, with an option to purchase the home at the end to the agreed period or time; usually one to three years at the purchase price you set when the agreement is signed. This can help you for several reasons, including...

1) You might be able to avoid foreclosure since you'll have income arriving regularly. Someone else will be paying the mortgage payment, and potentially a few hundred dollars a month more.

2) The tenant usually gives an up-front, non-refundable deposit that is usually 1% - 3% of the sales price. The great part for the seller is that if the tenant decides not to buy the home you still get to keep the money as part of your agreement.

3) Locating a ‘rent to own' tenant for your property is usually faster then trying to sell you home outright to a conventional buyer.

Now that's not to say there aren't risks.

Home prices might shoot up and you're locked into the price you agreed. And just as with a conventional renter, there's a chance the tenant could damage the property. So while it's true you may have a contract that outlines they are responsible for any damage, getting your money might be difficult, time consuming and costly if you go through the courts. In the end, you have to decide if a lease purchase agreement, or land contract, is right for you.