Lease Purchase
The Lease Purchase Agreement – Protect Your Interests
By Buyincomeproperty.com
Oct 11, 2005, 08:16

If you’re considering a lease purchase agreement, either as the buyer or the seller, be sure that you have a legal expert looking over the agreement before you sign. Think that lease purchase contracts are so common that there’s really no need to hire an attorney? Think again. The contract for a lease purchase is just like other contracts. Unless you have the legal training to decipher the “legal-ese,” you need someone who can.

A lease purchase contract is a fairly common agreement, entered into by thousands every year. There are plenty of advantages for both seller and buyer. For example, a buyer who has credit problems is more likely to be able to enter a lease purchase agreement with a private individual. That person may not qualify for a loan with a commercial lender or bank, but the individual who owns the property may be in a position to extend credit in the form of a lease purchase.

While that means that the owner doesn’t get the entire purchase price up front, there are also some advantages. The person who doesn’t qualify for an outside loan may be willing to pay more than the property would be worth on the typical open market. The seller in a lease purchase situation also collects the interest that a bank would have collected, making the total sell price more than it would have been otherwise.

Closing costs can be avoided with a lease purchase agreement, but the buyer may also not be aware that the property is worth less than the purchase price without an appraisal. The owner may also require a larger down payment because he’s putting his own money on the line with a lease purchase agreement.

Despite the potential advantages, there are also some potential negatives to a lease purchase option. The buyer may not make payments on time or the owner may try to renege on the contract after months or years of faithful payments. It may be difficult to evict a person or family who lives in the lease purchase home, or ridiculously easy to evict that family for a minor infraction.

Hiring an attorney can be the assurance that the deal will be executed fairly. But remember that a single attorney will be acting on behalf of the person who hired him. That means that you can’t depend on the buyer’s attorney to advise you regarding the lease purchase agreement.

One point is who retains ownership of the property at any given time. As the buyer, do you have the right to sell the property? If not, the lease purchase has been nothing more than a rental agreement for you – even if you’ve made payments for years. Early payoff, late payment penalties and insurance are among the potential issues that should be covered in the lease agreement contract.

If you positively don’t feel that you can afford a lawyer to protect your interests in a contract lease purchase situation, at least take time to carefully read the contract – the entire lease purchase contract. If there’s anything you don’t understand, be sure that you do understand it before you sign.

You’ll find plenty of lease agreement homes available. Before you jump into a lease purchase deal, take time to carefully consider the full impact of your action. If you’re a seller, you’re committing to allow someone to pay out the price of the lease purchase. If you’re a buyer, you’re committing to make those payments.