Owning your own home in Michigan can be very rewarding. If you have your heart set on a particular house that is currently out of your budget, you might enter into a lease purchase agreement. It allows you to initially rent the property and eventually own it and can give you a chance to pay back debt when your credit isn’t perfect and you need to secure a mortgage. You may wonder if you can modify your lease purchase agreement.
What is a lease purchase agreement?
Per real estate law, a lease purchase agreement is available for individuals who wish to rent but eventually buy a home. With the agreement, you may be required to pay money toward the right to buy the home. The buyer and seller have to agree on the sale price and the amount of rent before the agreement is signed. However, if the market is poor while you still hold the lease, you might have to pay more when you buy. If the market improves, you can buy the home at a lower price.
How long do lease purchase agreements last?
On average, lease purchase agreements can last anywhere from one to three years. You aren’t obligated to buy the house. However, even if you ultimately do not buy, you usually cannot get a refund on the money you previously put down. If you do choose to buy the home, the option fee you already paid can go toward the down payment. The amount you pay toward rent can also be added to it.
Can you modify your lease purchase agreement?
Real estate law requires an agreement to be reached between the buyer and seller when a lease purchase agreement is signed. That means you are legally bound to the terms of the agreement, which is like a contract. As a result, you cannot negotiate or modify the agreement. If you try to take a loophole and bypass the terms of the agreement, the seller can file a lawsuit and prevail.
Benefits of lease purchase agreements
The buyer and seller can reap benefits from a lease purchase agreement. For the buyer, it offers convenience and allows them to rent before owning the home if they choose to do so. They can also improve their credit score and start to build equity in the home for their eventual ownership.
The seller can benefit by attracting tenants, locking in a price on the home and receive a sizable down payment upfront. They can also keep the down payment if the buyer ends up defaulting on the agreement.