The following is a short list of items you can lease with the option to buy: A car (obvious); a dog (yes, a few organizations out there will allow you to take a dog out for a test drive for a couple of days and see if it works for you); a casket (I’m not sure who makes the final decision on this, what if the deceased is not happy with the chosen casket and would like to try a different model? How is that communicated to the living?); and camping gear (a good option; I wouldn’t even own a tent or a sleeping bag if I had tried it out first). I almost failed to mention the wife. A number of companies offer “wives” for rent. “We provide full services in cleaning, organizing, party services and minor household repairs. Because every working person deserves a wife,” explains one company. Amen to that. I could use one of those myself.
Less popular than a car, but still worth noting, is the lease option on a home. We don’t see many of these right now, primarily because they are more popular in a slow seller’s market. In fact, in all of Davis, Weber and Box Elder counties right now, there are only two listed homes that offer lease options.
A lease option to buy is basically a rental agreement between an owner and a tenant, where the tenant has the “option” to purchase after a designated period of time. In Utah, a lease option includes an amount of “option money.” This is a nonrefundable payment that is placed in a brokerage trust account that will be returned to the tenant or applied toward the down payment if the tenant ends up purchasing the home. In most cases, this is several thousand dollars. If the home is not purchased, the option money is kept by the seller. This can also include a security deposit that would be refundable if the home is purchased. Depending on the way the contract is written, a portion of the rent can be applied toward the down payment if the tenant ends up exercising the purchase as well.
Allow me to share a personal experience with this to give you, the reader, some idea of why it would or would not be a good idea to offer this option.
Back in 2009, when the real estate market was struggling, I had a listing in a great area with a good amount of land, but it was dated and small. Right now, we would have probably gotten multiple offers the first day, well over asking price, but that was then, and this is now.
After several weeks on the market, we were presented with a lease option to buy offer. The buyer (tenant), offered full price and several thousand dollars in option money. The lease would last for one year, at which time she would either exercise the option to buy, or she would need to move out. She would lose her option money, as well as the small part of her rent that was being held to go toward her down payment.
The buyer’s agent had implored my client to accept this offer. Her client was just getting her credit cleaned up after a bad divorce and she just needed a year before she would qualify. Her agent assured us that she was doing everything right to repair her credit. My client decided to accept the offer.
Things went well for a while. However, about 60 days before the year was up, I contacted the agent and asked her how the credit repair was coming. She assured me it was coming along as needed. I continued to check in. After 30 days, it was time to begin the loan process. Suddenly, she couldn’t perform. She had not been working on her credit score and it wasn’t where it needed to be. She was served her notice to vacate.
One month later, she had not only refused to leave, she also refused to continue making a payment. In the end, we had to get a court order to get her out of there.
My client got to keep the “option” money, but she had to pay the attorney, and then clean up the property, which was left in a fair amount of disarray.
In a market where it is easy to sell a home, there is little incentive for a seller to do a lease option and take that kind of a risk. That’s why there are very few available. Worry not, however; if you’re looking for lease options, there are still plenty of cars, dogs, caskets and wives.