How does a lease to buy work?

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Agree with most everything below but there are caveats that both Seller and Purchaser should be aware of.
First and foremost is a Lease Purchase Option is usually a unilateral contract. Meaning the buyer has an "option" to purchase or not purchase the property at or before contract end. This is key as a normal Real Estate sales agreement is bi-lateral an requires one party to sell and the other to purchase. Bottom line is both parties are tied into the contract (we won't discuss contract contingencies here), whereas in an Option to buy, only the Seller is tied into selling . So why would a seller agree to this arrangement? The obvious reason is, it is more financially beneficial to him/her. I can discuss this further if anyone is interested - just post it here.
Secondly, seller's need to realize that the Lease part of the agreement may or may not allow the purchaser certain rights over and above what is typically allowed for a "rental".
 
Usually this involves a lease for a specific term, during which the lessee has an option to purchase either before or at the end of the lease. All or part of the rental payments may be credited towards the purchase price. The purchase price or option price needs to be stated up front.  
Actually people get "lease" and "options" messed up and believe they are one in the same when they are not!!!!!!
A lease purchase is when you put some money down upfront and then maybe some of the monthly rental payment goes toward a deposit on purchasing the home.At the end of the lease purchase you have agreed to purchase that home at a specified price and terms,usually there is a dispute that arises as to who keeps the earnest money if the deal falls through,investors are shying away from lease purchases because it creates a "beneficial interest"in the property for the buyer which gives them a stake in the home and complicates things.
Lease options is what most investors are using now,a lease option gives the buyer no beneficial interest in the property.For example i own a property for 150k i will give the buyer a lease option for which they will pay me 3,000 for the OPTION of purchasing the home at that fixed price by the date specified in the contract,if they decide they don't want to buy at that time i can sell to someone else but the 3,000 is mine and is not a deposit on the property merely consideration for me giving them the option to buy my house at that price.
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