What is a lease-option agreement?

A lease-option agreement is a specific type of real estate contract that combines elements of both leasing and purchasing property. It allows the tenant (lessee) to rent a property with the added benefit of being able to purchase that property at a later date, usually at a predetermined price. This structure is particularly appealing to tenants who want the opportunity to buy a home but may not currently qualify for a mortgage or have enough savings for a down payment.

This agreement typically outlines the rental terms as well as the conditions under which the tenant can exercise their option to purchase, including the timeframe and the price. As a result, it provides the flexibility of renting while securing the possibility of ownership, making it a strategic financial decision for many prospective homeowners.

In contrast, other choices do not accurately describe a lease-option agreement. A binding sales contract refers to an agreement where the purchase of a property is finalized, which does not encompass any leasing arrangement. A short-term rental agreement only covers rental terms without any purchasing option, failing to include the crucial element of potential ownership. A contract for exchanging properties involves a completely different legal framework, focusing on swapping one property for another, rather than renting with an option to buy.