Keep Renting? Or Buy? How About a Lease Option!

As most people are now realizing, this is a terrific buyer's market--possibly the best buyer's market in over a decade. With home prices staying steady and even going down in parts of the Bay Area, now is a great time for first time homebuyers to to make a reasonable entry into the real estate market.

But, many first time homebuyers have nervous jitters, and that is very understandable. Not only is buying your first home a huge undertaking, but the media has everyone on edge about the stability of the real market. So, what do you do if you know that now is a good time to buy, but you are still a bit wary? This is the perfect situation to consider a "lease option."

A lease option is when you a rent a property with the option to purchase it a set price at some time in the future. The upside to the lease option is that your rent money will usually be contributed toward the purchase price of the property if and when you decide to exercise your option to purchase it.

For example, perhaps there is a condo you would like to purchase and it is listed at $350,000. A standard 20% down payment for it would be $70,000. If you set up a lease option to purchase it at that price in one year, perhaps you Could then pay $2000 per month in rent on the unit. When the option comes up in one year, you will have paid $24,000 in rent which could be used toward the down payment on the condominium. Of course this is a broad example, and every individual lease option agreement is different, but this illustrates how it might work. And, if for some reason you choose not to exercise the option, your rent money still provided you with shelter for a year.

A lease option is often a great situation for the seller, too. In a slower market like we are experiencing now, it helps entice buyers. And, if they are doing improvements on the property or a condo conversion, this helps keep the building occupied with interested buyers for when the property is ready to sell.

Lease options can be a very effective tool that makes both parties happy, but every situation is different. If you have any questions about lease options, just let me know. I am always happy to help. I can be reached at 510-547-5970 x57 or MSmartt@jps.net.