Leases, options, land contracts. Those terms are thrown around like socks in a locker room. But if you can grasp the concepts, you can be a giant step closer to owning a home without having to sell your first born to the bank. Essentially, the seller carries the purchase note in a lease option and a land contract, but with a land contract, you actually own the home. With a lease option, you still have some hoops to jump through, so it's important to spell out every detail.
Characteristics of Lease Options
Lease options can turn your rental palace into your permanent home. Option money is paid to your landlord for the right to buy your rental. Say goodbye to that cash because the seller keeps it whether you buy or leave at the lease's end. Rental payments usually go toward your purchase. You can strike a purchase price when you sign the lease or you can agree to base it on an appraisal down the road.
Sellers Finance Land Contract Sales
A land contract gives you the American dream on the spot. It is a purchase, pure and simple. You make a down payment to the seller and your monthly payments go straight into his pocket instead of to a bank or mortgage company. When you reach that milestone of your last payment, the seller gives you a property deed. Your deed is proof positive that your debt to the seller is paid.
If you shirk on your lease you may kill your option rights. Pay your rent and honor your lease terms so you can keep your option rights safe. If you skip land contract payments the seller can toss you out on your ear. You can also land in court with a lawsuit for missing lease or land contract payments. Take your contracts seriously. You don't want swim with the sharks in court.
You want the world to know you own your nest. Land contracts should be recorded at your county's register of deeds. Leases with options to buy should also be recorded. It lets everyone know you have first dibs on buying your rental. Recording protects your legal rights so make that trip to the register of deeds and make your deal official. It is cheap and easy to do. Filing fees are only about $20.
Maggie Lourdes is a full-time attorney in southeast Michigan. She teaches law at Cleary University in Ann Arbor and online for National University in San Diego. Her writing has been featured in "Realtor Magazine," the N.Y. State Bar's "Health Law Journal," "Oakland County Legal News," "Michigan Probate & Estate Planning Journal," "Eye Spy Magazine" and "Surplus Today" magazine.