What is a LEASE PURCHASE?
A lease purchase is a contract for sale on a property with early possession. It is a commitment to purchase a property after a specified period of time agreed upon between the buyer and seller. Specific monthly payments and terms are incorporated into the agreement. Generally a lease purchase agreement requires a specific amount of money upfront that will usually include earnest money, advances to the seller towards the purchase price, early occupancy fee, document fees, and/or a monthly payment.

How does it work? 
Let's say that a buyer has been told that he could not qualify for a loan because of his credit scores related to medical bills or a bankrupcy. The lender may say you have to wait 6 months or a year before you can buy a home.  A LEASE PURCHASE may be your solution.  You can contract for that home and take occupancy in advance of a closing providing the seller is in agreement.  For example:  A seller has a vacant home that he is offering for $160,000.  He would like to sell for cash but the vacant home is costing him dearly every month that it doesn't sell. You offer him his price, put up $1,000 for earnest money, pay him an additional $3,000 as an advance on the purchase price, pay a document preparation fee, agree to a monthly payment during the period of occupancy, and agree to close in one year. You receive credit at closing towards monies paid in advance of occupancy. Monthly payments may or may not receive partial credit at closing. There are many details that must be considered in the document preparation which are very important.  Lease Purchases are generally not promoted by REALTORS (see why below). You will probably have to locate a REALTOR, like Mick Corbin,  who specializes in these because most don't like them (see below). This arrangement works best if it is beneficial for all parties involved. 

What is a LEASE OPTION?
A lease option is also a contract but instead of a commitment to purchase, the buyer may elect to purchase, or not, after a specific period of time. Option money paid in advance is at risk.

What's the biggest difference between LEASE PURCHASE and a LEASE OPTION?
The first is a commitment to purchase after a specific period of time. The latter is not....purchase is optional.

Who is eligible for a LEASE PURCHASE?
Anyone who can come to terms with a seller and is of legal age and capacity.

How much money do I need?
There is no set amount, but you should not expect a seller to agree to a contract without some monies upfront. There are several variables that may affect the amount a buyer may be required to pay in advance. Some of these variables include: location of the property, market conditions, buyer motivation, seller motivation, price of the property, etc.  As a guide, you should expect to have at least 3% to 10% of the purchase price available at the time you sign the contract.

What are the risks for the buyer?
The biggest risk for the buyer is if the seller has an existing mortgage on the property. The seller must be willing to provide proof that he/she is making payments to the existing lender.  Without this proof, buyer could be fullfilling his contract obligation and payments, but if the seller is not, foreclosure can still occur.  This happens way too often! 

What are the risks for the seller?
The biggest risk for the seller is not having a contract that spells out what will happen in case of default by the buyer.  You may be granting to a buyer a property worth 6 figures for a relatively small amount of money upfront. What happens if they default?  What happens if they are destructive?  How will you get them out?

Why don't real estate people like doing lease purchases?
Most real estate people hate lease purchases or options. Why?  Two reasons. First, brokers hate them because they are risky for the buyer, the seller, and the real estate brokerage, and especially for the inexperienced associate and, secondly, there is no certainty that the associate or the company will ever be paid a commission. You really need a very experienced real estate person who knows how to put them together and understands the risks in putting them together and can effectively satisfy all the parties involved..  There are a few of us.