Here is an example of an option and the route to get there...

• The potential tenant decides they like the 3 bedroom house at Andrew's Court that leases for $995/mo. or lease options for $1095/mo. Most of my lease option homes put a higher rent on the option to purchase scenarios.
• Next, a rental application is filled out which takes approximately 2 business days to get an appoval, disapproval, or approval with conditions.
• The agreement will entail a lease agreement with an option to purchase addendum. The option to buy will expire upon the termination of the lease. If it's a 12 month lease, then that is when your option would expire. Note: If you were to default on your lease (eviction or breaking the lease) your option would expire at the same time.
• You may buy the house at the quoted option price any time during the lease period, however, the purchase must be recorded (closed) prior to the end of your lease
• Financing: You must secure your own financing! The lease option is not to be confused with a contract sale. The downpayment, closings costs, and terms for obtaining financing are not in our (the seller's) control. These will all be determined your lender. Some lenders may even cap how much in monthly credits they will let you receive from the seller (my experience has seen up to 3% of the purchase price). This is one of the many reasons we recommend you talk with a lender about ability to get financing prior to entering into an option to purchase. The seller will not agree to FHA or VA financing under the current terms. We will entertain that type of financing if you can compensate us for the additional seller fees involved with these loans and if the house qualifies for the financing.
• Credits: Usually the seller will pay some of your closings costs in the form of "X" amount of dollars times every months rent you paid. For example if it was $200/mo. and you closed in the 10th month of your lease it would be $2000 (10 x $200).
• Option Fee: This is a good tool for you if you are serious about the house, know you will close on it, and have the money for it. The purchase price is usually affected by this fee. If there isn't an option fee required, then you would probably be able to get a better purchase price if you paid one. For example, at the time of writing this I have some houses that the purchase price is $5000 higher without the option fee of $2500. The option fee is a credit towards the purchase of the house, but it is non-refundable if you fail to close. In the option agreement it is labeled as NON-REFUNDABLE earnest money.
• 2 Year Terms: I am frequently asked about the availability of a two year term. We have done them, but it really has to be dealt with on a individual basis. One of the things that affects this is when the market is showing high appreciation. In these instances the seller doesn't have a lot of motivation to guarantee a price.

Note: This example was meant to help you in your understanding of how a lease option works with our company. It is not a guarantee of terms, availability of a home, or a promise to lease a house to you. As with any legal agreement you should seek the counsel of an attorney.