agreements specify that a portion of the rent on the property in
question is applied toward the purchase if the option is exercised. This
is referred to as rent credit. Institutional lenders accept rent credits
as part of the down payment if rental payments exceed the market rent
and if a valid lease-purchase agreement is in effect, a copy of which
must be attached to the loan application.
For sellers, lease options give them several
advantages, especially in a slow market. These include a monthly rent
higher than market rent, top-market value for the property and tax-free
use of the option consideration until the option expires or is
exercised. Also, the renter is more likely to treat the property like an
owner, tax-free use of option consideration until the option expires or
Lease-options should be read carefully for details on
transferring the option and other important concerns.