Lease purchase options

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 Not Quite Ready to Buy a Home? You May Still Be Able to Move Into One Today!

Our Lease Purchase Program is designed for individuals and families who want to become homeowners but may not currently qualify for traditional mortgage financing.

Whether you're working on improving your credit, saving money, or establishing a stronger financial history, a lease purchase gives you the opportunity to secure a home today while preparing to purchase it in the future.

Unlike traditional renting, a lease purchase provides you with an opportunity to become the owner of the home you're living in.

 A lease purchase arrangement allows a qualified Tenant/Buyer to rent a property for an agreed-upon period, typically 12 to 24 months, while securing an option to purchase that property at an agreed-upon price.

The agreement establishes:

• The agreed-upon purchase price.
• The initial, non-refundable option investment.
• The monthly rental payment.
• The length of the lease and purchase option.
• The responsibilities of both the Tenant/Buyer and Seller/Landlord.
• The deadline for exercising the option to purchase.

During this period, the Tenant/Buyer has the opportunity to improve their credit, establish consistent payment history, and work toward obtaining mortgage approval.

The goal is simple: Move in today, prepare financially, and become a homeowner in the near future.

 Unlike traditional renting, where you typically pay a security deposit and first month's rent, our Lease Purchase Program requires an initial investment known as an Option Consideration Fee.

This investment serves several important purposes:

• Secures your exclusive right to purchase the property during the agreed-upon option period.
• Establishes the agreed-upon purchase price.
• Compensates the Seller/Landlord for taking the property off the market for other buyers.
• Is credited toward the purchase price if you exercise your purchase option within the agreed-upon term and successfully close.

Important: Your initial option investment is non-refundable.

However, if you exercise your option and complete the purchase according to the agreement, the full agreed-upon credit is applied toward your purchase.

If you decide not to purchase, fail to exercise your option by the deadline, or do not complete the purchase under the agreement, the option consideration is generally forfeited, subject to the agreement and applicable law.

The forfeited option consideration may be treated as agreed-upon liquidated damages for the lost purchase opportunity, provided the provision is legally enforceable.

The option investment is separate from any refundable security deposit.

 When you enter a Lease Purchase Program, you're not simply renting a property. You're preparing to become its owner.

Traditional Tenant

• Pays rent for the right to occupy the property.
• Generally contacts the landlord when repairs or maintenance problems occur.
• Does not have a contractual right to purchase the property.
• Does not have a guaranteed future purchase price.
• May have to move if the property is sold, subject to lease protections.
• Builds no direct purchase-price credit simply by paying rent.

Lease Purchase Tenant/Buyer

• Pays monthly rent while preparing to purchase the home.
• Makes an initial option investment securing the right to purchase.
• Has an agreed-upon purchase price during the option period.
• Accepts responsibility for agreed-upon maintenance and repairs, subject to applicable landlord-tenant laws.
• Has the opportunity to inspect the property and negotiate repairs before moving in.
• Has the exclusive contractual right to purchase during the option period.
• Can improve the property, subject to written approval, knowing there is an opportunity to become the owner.

The biggest difference: A traditional tenant is paying for housing. A Tenant/Buyer is paying for housing while pursuing an opportunity to own that home.

 Before entering into the agreement and taking possession, every Tenant/Buyer has the opportunity to have the property professionally inspected at their own expense.

This is strongly encouraged.

Any concerns discovered during the inspection should be discussed and negotiated with the Seller/Landlord before possession.

Both parties can agree in writing on:

• Repairs the Seller/Landlord will complete before move-in.
• Repairs the Tenant/Buyer agrees to undertake.
• Any repair allowances or purchase-price credits.
• The property's condition at the time possession is delivered.

Once possession begins, the Tenant/Buyer assumes responsibility for the maintenance and repairs assigned to them under the written agreement.

This may include plumbing, electrical, heating, appliances, general maintenance, and other interior or exterior repairs, to the extent permitted by law.

This differs from a traditional rental, where the landlord generally remains responsible for maintaining the property and addressing legally required repairs.

Why is this important?

Because the Tenant/Buyer is preparing to become the homeowner, they begin taking on many of the responsibilities associated with homeownership.

However, the Seller/Landlord remains responsible for any legal obligations that cannot be transferred to a tenant, including applicable habitability and safety requirements.

Major alterations and improvements must receive the Seller/Landlord's prior written approval. No repair or improvement creates a credit toward the purchase price unless specifically agreed upon in writing.

 One of the most attractive features of a lease purchase is the opportunity to establish the purchase price before moving in.

For example, if the property is valued and priced at $150,000 today, that price can remain locked in throughout your agreed-upon option period.

If the property's market value increases to $165,000 during that period, the Seller/Landlord cannot increase your agreed-upon purchase price simply because the market improved.

You retain the right to purchase at the contracted price, provided you comply with the agreement.

Protection Against Declining Property Values

Our program can also include an appraisal protection provision.

If the property's appraised value decreases through no fault of the Tenant/Buyer, the purchase price may be adjusted downward to the appraised value, provided that protection is specifically included in the signed agreement.

For example:

• Original agreed-upon purchase price: $150,000
• Appraised value at purchase: $140,000
• Adjusted purchase price: $140,000, if the appraisal protection provision applies.

This protects the Tenant/Buyer from being required under the option terms to purchase at a price higher than the property's qualifying appraised value.

The appraisal process, valuation date, and any exceptions for damage or unauthorized alterations must be clearly defined in the agreement.

 During the agreed-upon option period, the Seller/Landlord agrees not to sell or otherwise transfer the property in violation of the Tenant/Buyer's exclusive purchase rights.

This means the Seller cannot simply accept a better offer from another buyer and disregard the agreement.

Your initial option investment helps secure that exclusive purchase opportunity.

This protection should be clearly stated in the written option agreement, with appropriate title protections considered.

 One of the greatest benefits of our program is the time it gives you to prepare financially for homeownership.

During the lease purchase period, you can:

• Work with a qualified credit specialist or mortgage lender.
• Correct credit-reporting errors and address outstanding debts.
• Improve your credit scores and debt-to-income ratio.
• Establish a consistent history of on-time rental payments.
• Save money for closing costs and other homeownership expenses.
• Prepare for mortgage qualification.

We encourage all Tenant/Buyers to begin working with a mortgage professional immediately rather than waiting until the end of the agreement.

The sooner you establish a plan, the better your opportunity to purchase before the deadline.

Please understand that mortgage approval is not guaranteed. It depends on your credit, income, debts, lender guidelines, and other financial qualifications.

 Option A – You Purchase the Property

If you're financially prepared and exercise your option within the agreed-upon deadline, you proceed toward closing.

Your initial option investment is credited toward the purchase price as provided in the agreement.

You obtain financing or otherwise complete the purchase, and ownership transfers to you at closing.

Option B – You Need More Time

Sometimes life happens, and you may need additional time to qualify for financing.

The Tenant/Buyer may request an extension.

However, extensions are not automatic. Both parties must agree in writing to any extension, including revised dates, payments, or additional consideration.

Option C – You Decide Not to Purchase

If you choose not to purchase, fail to exercise the option before its expiration, or do not complete the purchase as required, and no written extension is agreed upon:

• Your exclusive right to purchase expires according to the agreement.
• Your non-refundable option investment is forfeited, subject to applicable law.
• You do not receive ownership of the property.
• Any remaining tenancy or move-out obligations are governed by the lease and applicable law.

This is why we strongly encourage every applicant to enter the program with a realistic plan for becoming mortgage-ready.

 Here is a hypothetical example of how the program might work.

Item Example Agreed purchase price $150,000

Initial option investment $7,500

Monthly rent $1,200

Lease purchase term24 months 

Purchase-price credit at closing $7,500

Remaining purchase price $142,500

After 24 months, assuming you properly exercise your option and complete the purchase, your $7,500 initial investment is credited toward the agreed purchase price.

You would have a remaining purchase price of $142,500 before any other negotiated credits or adjustments.

Monthly rent is payment for occupancy and is not automatically credited toward the purchase unless a separate rent-credit provision is specifically included in the agreement.

Your lender will determine whether the option consideration qualifies toward mortgage down-payment requirements. Additional funds may be needed for financing and closing costs.

 Advantages for the Tenant/Buyer

• Move in sooner: Occupy a home before qualifying for a traditional mortgage.
• Lock in the purchase price: Protect yourself against increases in the property's market value.
• Secure your purchase opportunity: The owner agrees to honor your exclusive purchase rights during the option period.
• Improve your financial position: Use the lease term to strengthen your credit, reduce debt, and prepare for mortgage financing.
• Potential appraisal protection: If included in the agreement, a decline in market value may result in a lower purchase price.
• Get to know the property: Live in the home before deciding whether to complete the purchase.
• Potential investment credit: Apply your initial option consideration toward the purchase price at closing.
• Greater stability: Establish a home with the goal of long-term ownership.

Disadvantages and Risks for the Tenant/Buyer

• Non-refundable investment: If you don't purchase according to the agreement, you may lose your initial option payment.
• Repair expenses: You may be responsible for substantial maintenance and repairs during the tenancy, as legally permitted and agreed upon.
• Financing is not guaranteed: You may improve your credit but still be unable to obtain a mortgage.
• Purchase deadlines: Missing the option deadline can result in losing your purchase rights.
• Improvement costs: Money spent improving the property may not be reimbursed if you don't purchase.
• Potential property value changes: Without a written appraisal protection provision, a lower appraisal does not automatically reduce the contract price.
• Additional closing expenses: You may still need funds for closing costs, insurance, taxes, and lender-required payments.

 A lease purchase may be an excellent opportunity if you:

• Have a steady, verifiable source of income.
• Want to become a homeowner but need time to qualify.
• Are willing to work toward improving your credit.
• Have funds available for the initial option investment.
• Understand the responsibilities of maintaining a home.
• Are committed to purchasing within the agreed-upon term.

A lease purchase may not be appropriate if you are uncertain about remaining in the home, cannot comfortably afford the monthly payment and anticipated repair expenses, or do not have a realistic path toward financing.

Our Commitment to Future Homeowners

We believe that not everyone who wants to own a home is in a financial position to purchase one today.

That doesn't mean homeownership has to be out of reach.

Our Lease Purchase Program offers qualified individuals and families an alternative path toward owning a home, with clearly defined expectations, purchase rights, and responsibilities.

Our goal is not simply to place tenants in properties. It is to help qualified Tenant/Buyers work toward successfully becoming homeowners.

Don't Just Rent a Home. Work Toward Owning One!

TheRealEstateExpert.Online

Program information is educational and subject to the terms of the signed agreements and applicable Michigan law. This program does not guarantee mortgage approval, appreciation, purchase-price adjustments, or eventual homeownership.