Lease To Own Pitfalls - Part 3

So you've decided to lease a home with an option to buy. Great!! - The contract is signed and the moving truck is packed.

10% of your monthly lease payment will be credited toward the purchase price of your home and when you include the amount of money you gave the seller as your lease option 'premium', at the end of 12 months you'll have enough 'equity' built for your lender to give you a loan.

The perfect scenario? It may be, unless you find out that the payments you've been making to the seller, in turn are not being made to the seller's lender.

In today's volatile real estate market, this is a very legitimate concern that potential lease to own buyers should be aware of.

What to do? As mentioned earlier make sure that you have qualified and appropriate representation through an attorney and/or a licensed real estate professional who specializes in lease to own homes.

As far as specific procedures to help avoid this type of unfortunate event, before entering into a lease to own contract you could ask for a 12 month payment history on the home from the seller to prove that they are not currently delinquent on their mortgage. As far as future payments, you can also agree with the seller to establish and EFT (electronci funds transfer) so that your lease payments are made electronically to the seller and in return the seller agrees to make EFT payments to their lender.

In addition, you can also request that an escrow account be established for any funds used toward your option premium. Just remember that this is a negotiable item and can by home, seller and state.