Lease to buy

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by Michael W. Clubb

With cash and credit hard to get, creative bargaining can help you buy a home of your own.

What with interest rates remaining high and the economy in such a state that most folks seem to have less cash available than they did a few years back, it's becoming increasingly obvious that the American dream of owning a home is often simply a dream . . . a fantasy beyond the financial reach of a good many people.

However, there is a way to go about buying a home (and to do so without bidding farewell to every bit of your hard-earned cash) . . . using a technique known in real estate lingo as "leasing with option to purchase". Put simply, the lease option enables you to move onto a piece of property and pay rent for an agreed-upon amount of time, and — during that period — to have the opportunity (but not the requirement ) to buy the dwelling. If you decide that the house is just what you've been looking for, you simply exercise your option and — by doing so — form a binding contract of sale. Conversely, should you conclude that the property isn't quite up to your expectations, you can just inform the seller that you don't intend to buy . . . and thereby terminate the option agreement.

THE PROS . . .

One obvious advantage of the lease-to-buy arrangement is that it gives the prospective owner the opportunity to actually live in the house in question before putting any money down. As the renter, you'll discover the quirks (if there are any) in the plumbing, electrical wiring, etc., and have time to determine whether any major renovations are needed. You'll even be able to inspect the home under various weather conditions and during different seasons.

The lease option is attractive from a financial viewpoint, too. The usual arrangement in this type of agreement, you see, is to apply a portion of each month's rent toward the down payment, making it possible for a buyer to become a landowner without having to put out as much cash at one time as would normally be required .

. . . AND THE CONS

Unfortunately, there are usually some trade-offs that have to be made when obtaining the privilege of leasing with the option to buy. You might, for example, have to pay a slightly higher rent (say, $50 extra on a monthly fee of $250) during the option period. This additional money, however, will — in most cases — be credited toward the down payment . . . so you'll lose out only if you decide to forgo the purchase.