Lease with option to buy agreements (lease options for short) are great for tenants wishing to have their own home but are either short on cash or unqualified for a mortgage. For one, it will give you enough time to save money for the intended purchase. But more importantly, it will also help you improve your credit history, thus improving your chances of getting a mortgage in the future.
That being said, there are many lease with option to buy agreements in AZ today. To make sure you end up with the best property deals available, you need to ask the right questions, including:
Are There Two Contracts in the Agreement?
Lease options are actually made up of two contracts. The first one is the standard lease agreement, which works like any other rental contract between a landlord and a tenant. The second one is the option-to-purchase agreement, which contains the terms you’ll have to abide by in case you decide to buy the property you’re renting.
If you’re considering lease with option to buy agreements in AZ, you need to make sure the homeowner hands out both these contracts. That way, you can choose to prolong the rental contract, while keeping the option to purchase open.
What Should Be Included in the Rental Contract?
In any lease option agreement, you’ll always start out as a tenant. The property, along with its title and incomes, remains with the landlord until you decide to purchase it. Thus, your rental contract must contain most of the terms found in a standard lease agreement. According to this Nolo article, these are:\
- Number of occupants (with names)
- Description of the property
- Agreed upon rental price
- Security deposits and fees (if any)
- Repair and maintenance policies
- Landlord's right to enter rental property
- Required landlord disclosures
- Contact information of both parties
- Other rules and important policies
What Should Be Included in the Option-to-Purchase Contract?
Financially speaking, there’s a lot at stake for both landlord and tenant when option-to-purchase agreements are concerned. So the least you can do before entering into one is make sure all important terms and conditions are in the second contract. These includes:
- Agreed upon lease option fee
- Duration of the lease option period
- Agreed upon purchase price of the house
- Adherence of the property to state and local laws
- Policies in case you don’t want to purchase the property anymore
Do You Need a Lawyer to Draft These Contracts?
Entering into lease and option-to-purchase agreements can be quite risky. What’s more, both landlord and tenant must abide by state and local laws when entering into house rental or purchase contracts. Depending on the state you’re in, you might even be required to have the contracts recorded in a courthouse.
Navigating through these laws while ensuring the right terms are included in the contract can be time-consuming and difficult for both parties. By hiring a lawyer to take care of it, you’ll avoid unnecessary stress, and make sure everything is in order.
Is the Rent Higher for Lease Option Agreements?
Yes and no. Though it will ultimately depend on the property and the landlord, rent rates for lease option properties are usually higher than standard rental ones. However, this is because a percentage of the monthly payment will be placed in an escrow account until the rental contract ends (or if the escrow agent receives appropriate instructions to do so). So the extra money you’ll have to dish out will still return to you when the time comes.
Moreover, this higher rent will work to your advantage. Upon ending the lease contract, the money in the escrow account will be handed back to you. And as it had accumulated during the rental period, it will give you much-needed financial leeway when purchasing the property.
Who Will Be In Charge of Repairs and Maintenance?
In a traditional rental property, the landlord will be in charge of making the necessary repairs and maintenance. However, if you're considering lease with option to buy agreements in AZ, then you’ll probably be the one to handle those things (along with the expenses they entail). This is most likely because the landlords really hope you’ll actually purchase the property at some point. So since you’ll end up owning the place in the future, you might as well take on the responsibility of taking care of it, too.
Bear in mind that not all lease option landlords delegate repairs and maintenance to their tenants. Some still chose to handle it themselves so keep the property pristine (and in case the tenant doesn’t end up buying it). So to be sure it’s your responsibility, best check it in the contracts.
What Other Obligations Must You Fulfill As the Tenant?
Aside from the repairs and maintenance, you’ll also have to comply with all the other rules and duties listed in the rental agreement. That means paying on the schedule stated in the contract, keeping no pets, not smoking or drinking within the property, and more.
Violating any of these terms will render both the rental and option-to-purchase contracts null and void. Aside from potentially forfeiting the option fee and the money in the escrow account, you could end up getting kicked out of the property and facing legal issues. So avoid crossing that line at all costs.
Where Do You Find Lease Options Homes?
Finding properties that come with lease with option to buy agreements can be done fairly easily. For one thing, you can contact any seller directly. You can find them in many online real estate websites and even in some social media platforms. You can also reach out to experienced real estate professionals like Rent It Love It Buy It Homes for a hassle-free application process.
But if it’s your first time buying rent-to-own properties, then better look for a broker. Though they come with fees, they’ll help you find the best, most affordable property available. Luckily, there are many agents and brokerages online that offer such homes. Alternatively, you can go to foreclosure markets, which offer many decent properties to would-be homeowners with a steady income.
Looking for Lease With Option To Buy Agreements In AZ?
Entering into lease with option to buy agreements in AZ can help you get that Arizona property you’ve been dreaming about. So to improve your chances of settling down in the Grand Canyon State, remember to ask the questions above as you go house hunting. You can try applying here and see if you qualify.