You're running out of time. The house hasn't sold and you need to be at your new job in less than one month. Should you lower the price? Rent the house? Instead, try lease purchase terms to entice a buyer!

Even though a lease purchase is often confused with a lease option, it's entirely different. A lease purchase is a true sale, but with a delayed but predetermined closing date often six months or more in the future. It works well when a seller needs to move but the house hasn't sold. It can also accommodate an otherwise strong buyer who needs time for their house to sell or to accumulate additional time on the job in order to qualify for a mortgage loan.

As with any sale, a purchase agreement is drafted and an earnest money deposit is taken. Should the buyer not close the purchase, any and all of the default provisions listed in the purchase agreement would apply (including loss of earnest money deposit). Since the buyer will occupy the house prior to closing, it's wise to obtain as much earnest money as possible. It serves as a motivator to close the sale and can help cover property repairs required prior to closing.

You need to determine how much you'd charge a buyer in monthly lease payments until closing. This can be just enough to cover your current mortgage payment, what similar properties like yours are renting for or equal to what the buyer's new payment will be once the sale is closed (another great motivator for the buyer to close!). Often in a lease purchase the seller will allow a certain amount of the buyer's monthly lease payment apply to lowering the sales price of the property or go to closing costs. While it's a great incentive to attract a buyer, but make sure that the buyer double checks with the lender to ensure that monthly credits can apply under the financing program he's seeking. Viewed as buyer incentives under some loan programs, the amount allowed may be capped or disallowed entirely.

Even though you're anxious to move, make sure that you (and ideally, a third party like a real estate agent) walk through the property with the buyer prior to his occupancy. Note the condition of the flooring, carpeting, and walls as well as the general condition of the home's exterior and yard. Also note any appliance or fixture that isn't working. Present a copy of your inspection notes to the buyer as well and have him concur by signing both copies. The walk-through will serve as a benchmark of the property's condition at the time you vacated and won't allow the buyer to later claim he wasn't informed about the condition of the house.

One last caution when using a lease purchase. Before you accept the contract, make sure that the buyer is pre-approved for the mortgage he needs to obtain. You'll also want the real estate agent and the lender to quote you the approximate amount of closing costs you can expect to pay at closing. Even though a lease purchase can sidestep having to rent the house, saddling yourself with a marginal buyer who can't qualify for financing could prove far worse (and more time consuming) in the long run.

Published: September 1, 2000

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Julie Garton-Good, DREI “The Frugal HomeOwner™” As a syndicated newspaper columnist, author and international speaker, Julie Garton-Good DREI, C-CREC™, is called “America’s Home Affordability Expert”, addressing more than 25,000 persons annually on topics of real estate industry trends and home affordability. She is the author of five real estate books and is the sole two-time recipient of the international "Real Estate Educator of the Year" award from the Real Estate Educators Association. In 1997, The National Association of Realtors® nominated Julie as one of the fifty most influential people in the real estate industry. She shared the list with only three other women.