Lease with Option to Buy

There is considerable misunderstanding of the concept of a lease with an option to buy.  People seem to think you can just rent a place and then buy it later any time you want.  You can actually lease a property and buyer it later, but there is more to it than that.  First, you have to offer some “option money”.  Option money is usually $10,000 to $20,000 held in an escrow account.  The amount of time is usually one year.  At the end of the year, if the renter/buyer decides buy the property, the option money becomes part of the down payment.  When the renter/buyer decides to buy the property it is said that he/she has decided to “exercise” his/her option.  If the renter/buyer decides not to buy the property, then he/she forfeits all of the option money to the seller/landlord.  In addition to the option money there is monthly leaserent.  What happens to the leaserent is a matter of negotiation.  All of it can go to the seller/landlord, or buyer and seller may agree that a portion, or even all, of the leaserent will also go toward the down payment.  That is if the buyer decides to exercise his/her option.  If the buyer doesn’t exercise his/her option, then all of the lease rent remains with the seller/landlord.