Down-Sizer’s Play Book

Often, after the kids are gone off to college or we pass other milestones in life, we find ourselves wondering “Why are we living in such a big place?” The next thought is: If I sell this place, what am I going to do with all of my stuff until I find another home?

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Our clients have often presumed the only solution is to simultaneously buy a new place while selling the old one. But banks present limited or non-existent options. When your home is being sold it’s an asset promised to a buyer. Banks commonly won’t loan against that equity.

A potential solution is a Lease-to-Buy contract. Leasing the new home gives Down-Sizer’s the opportunity to relocate themselves and all their stuff on a comfortable schedule. How long? Perhaps months. How long will it take for you to sell your home in your local market? Our advice: Double that timeframe.

But beware – committing to this kind of an arrangement carries a different blend of risks. Talk to your Real Estate Broker about the pros and cons. Some homes are bound by Home Owner Association (HOA) rules and CCR’s (Codes Covenants and Restrictions.) In some cases Lease-Purchase contracts can be more difficult to get approved as a result. A Realtor can help.

Basics of a Lease Purchase
The buyer pays the seller option money for the right to later purchase the property. This option money may be substantial.
The buyer and seller agree on a purchase price, often at or a bit higher than market value.

During the term of the option, the buyer agrees to lease the property from the seller for a predetermined rental amount.
The term of the lease-purchase agreement is negotiable, but the common length is generally from one year to three years, at which time the buyer applies for bank financing and pays the seller in full.

  • The option money generally does not apply toward the down payment. And! Option money is, generally speaking, nonrefundable.
  • A portion of the monthly lease payment typically applies toward the purchase price.
  • Nobody else can buy the property unless the buyer defaults.
  • The buyer typically cannot assign the lease-purchase agreement without the seller’s approval.
  • Buyers are often responsible for maintaining the property and paying all expenses associated with its upkeep, including taxes and insurance.
  • The buyer is obligated to buy the property.

The above outline of a “Lease-Purchase” agreement is excerpted from an article at which discusses variations of this kind of purchase agreement. You can read all of that article at this link:

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