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"Whether buying or selling, the 'lease-option' really works for buyers and sellers!" stated Realtor Mike Payne with Horizon Realty (Sarasota, Florida) of Southwest Florida.

In today's housing market, conventional selling strategies don't work.

The various terms "lease-option," "rent to own," lease-purchase" and "lease to own" allow both buyers and sellers to take advantage of a "sub" market, a market not exploited by traditional Realtors.

When done legally and ethically, a "rent-to-own" transaction provides a win-win for buyers and sellers.

"Owner financing is not new'far from it. In various forms, buyers and sellers have utilized 'rent to own' strategies for decades," Payne confirmed.

When done right, both buyers and sellers enjoy a win-win transaction. The buyer gets a nice home in a nice neighborhood at a fair price and with time to get financing. The seller gets his sales price, depreciates his property during the lease term, and collects a sufficient option fee from the buyer.

The option fee and rent premium are viewed differently by buyers and sellers. To the buyer, they're part of the equity in the house they will soon own. Fully expecting to exercise the option, buyers pay a 2-5% option fee to control their new home with no bank qualifying. To sellers, however, these option payments are the best guarantee that their houses will sell; if they don't sell, the payments are retained as income.

Further, each party relies on a strong lease-purchase contract, not a three-in-one "contract" loosely thrown together and dangerous to both parties.

Payne added, "Many buyers and sellers have ended up in court over a bad contract they attempted to throw together without a Realtor, a trained 'rent-to-own home specialist' or a real estate attorney. Absolutely, buyers and sellers must use a solid Lease-Purchase contract protecting both parties and both parties should not even think twice about involving a real estate attorney."

It's not enough to have a strong contract protecting both parties.

"Proper screening of prospective tenant-buyers must occur in order to separate the renters from the homeowners-in-training. Once the tenant-buyer checks out, a seller must demand a sufficient non-refundable option fee to keep the tenant-buyer committed to the property," Payne added.

Each party further believes the other side will act honorably during the lease term. The seller will not attempt to take the property back to recapture lost appreciation.

The buyer agrees to make on-time monthly payments, maintain the property according to the contract and the homeowner's association & improve the his/her credit (or other issues) to qualify for traditional financing.

Fundamentally, this is how a lease-to-own contract works. It's a simple but effective buying and selling strategy.

"Yes, it's simple and effective, but as with any real estate transaction a successful transaction depends on the details," said Payne.

Success depends on the details.

For instance, SELLERS must:

1. Prevent an equitable interest claim filed against the seller?
2. Oversee their property during the lease term?
3. Know about a monthly rent credit?
4. Know what causes mortgage underwriters to disqualify a monthly rent credit?
5. Know how to determine the length of the lease term?
6. What is an "assignment" and how could an assignment hurt you?

On the flip side, BUYERS must:

1. Protect their interest in the property against unscrupulous sellers who attempt to cancel the contract & take the property back.
2. Get contract language protecting against unforeseen setbacks.
3. Avoid unlicensed & untrained "rent-to-own home specialists" who have taken the latest "guru" weekend bootcamp and suddenly "specialize" in owner financing.
4. Protect their option payments with strong contract language.
5. Pay a real estate attorney $200-$300 to confirm the proposed contract protects the buyers.

Big paydays lure many people, including scammers, to real estate. Some scammers dress nicely, drive expensive vehicles & sound as if they want to help you.

Sellers and buyers both can benefit from "owner financing" provided both parties have their interests reviewed and protected by attorneys & work with people who know Lease-Purchase Agreements.