What is a lease option in real estate?

A lease option in real estate is a contractual agreement that grants the tenant the right to purchase the property at a predetermined price within a specific timeframe. This arrangement combines elements of leasing and purchasing, allowing the tenant not only to occupy the property but also to secure the opportunity to buy it in the future.

Typically, part of the lease payments may go toward the purchase price, creating further incentive for the tenant. This type of option is often appealing to tenants who may not currently qualify for financing but wish to invest in homeownership later. By locking in a price and having the right to purchase, the tenant gains stability and potential equity in a rising market.

In contrast, options that simply allow for leasing without any purchasing rights do not provide the same benefits and protections. Additionally, the confusion with mortgage types or temporary agreements lacking purchase conditions highlights the unique nature of a lease option, which explicitly incorporates the future purchasing capability.