Lease W/option To Buy VS. Contract For Deed
What are the major differences?
I'm clear on lease options, is there anything in particular I need to be aware of in a contract for deed situation?
What are the major differences?
I'm clear on lease options, is there anything in particular I need to be aware of in a contract for deed situation?
with a contract for deed they get some tax breaks, ie taxes paid on property. agreement for deed basicly is saying they are agreeing to buy the property and they will get the deed when all terms and conditions are met in the contract. lease option is just leasing and i have the option to buy. AFD they are buying.
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"If I had 8 hours to chop down a tree, I would spend 6 hours sharpening the axe." - Abe Lincoln[ Edited by nebulousd on Date 11/03/2003 ]
To clarify,
Are you saying that the contract for deed does not have the same 'out' as a lease option? In other words, purchase must take place at end of lease period?
Under a contract for deed the seller keeps the deed in his/her name until the terms of the contract have been met. This is a sale on the property. Although you are still the deed holder, you have someone with equitable interest in the property and in most states requires a forclosure.
Under a lease with option to buy, you should have two forms: a lease and then an option to buy. You now are leasing out the property and they are to pay you rent. The deed obviously stays in your name and you own the property. The option simply states that at any time, the tenant, may become a buyer and buy the property at a predetermined price. They don't have to excersise this option. It is possible to create an equitable interest in the property here with rent credits so make sure to talk to an attorney.
Basically when you have a contract for deed, you are selling the property. Lease/Option you are not selling the property. You are simply leasing but with the agreement that you will sell it if and only if the tenant wants to buy.
Hope this helps! GOOD LUCK
kc,
With Contract For Deed (CFD) there is no lease period. You are doing owner financing for the house, complete with selecting the purchase price and an interest rate to charge the buyer. It is to your benefit, however, because you still retain the deed until the home is completely paid off. It is a better deal for the buyer because they get to write off mortgage interest and taxes.
-Chris
[addsig]