I’ve had several calls in the past few months from people looking for a rent to own or lease purchase situation. I’ve been involved in these a handful of times during my real estate career. They are complicated and rarely result in an actual purchase. The lease purchase involves setting out the terms of a lease and a sale contract all in one. It’s difficult to determine an appropriate or fair sale price for the future closing of the sale that may be 6, 12 or 24 months away! The real estate market is ever changing and it’s unlikely that a predicted future price of the house will reflect fair market value at that time, especially if the closing date is few away. Everything is negotiable regarding the lease terms and the terms of the purchase. They can be structured to favor the buyer but it’s more likely that the owner will only agree to terms in their favor. Often there is a sizable non-refundable deposit but there are no set requirements.
I wonder why the buyer cannot buy now but they believe they will be able to at a specific future date. Sometimes things don’t happen as planned and an unexpected twist prohibits loan approval. There are typically many changes in mortgage loan programs over just 12 months and interest rates change daily. A spike in interest rates can affect your buying power. A job change or transfer can also put a kink in your plans. Searching for a lease purchase will also greatly limit your home or condo choices. I suggest you just stay in a standard lease situation until you are ready to buy. You will have more options for the lease and then the purchase. It will likely require you to move twice but you will have a better position to negotiate the terms of each agreement separately. It will be much easier to negotiate the price and terms of a sale and avoid appraisal surprises with a more typical contract to close time frame!
There may be certain times that a lease purchase is a good fit. I’ve noted some common issues above but it is possible for all the stars to align and the details to fall into place. If the details concern you, it might be a better fit to look for a rental until you are able to buy.
I work with several very knowledgeable mortgage lenders. I’m glad to connect you with someone who can assist you in getting pre-approved for a loan or give you advice to improve your credit and prepare you to buy a home in the future. Search for homes in Franklin, TN and surrounding areas of Nashville by neighborhood or school zoning.