What is a lease purchase contract? The Basics

by: Jeff Beaubien

What is a Contract?

A contract is an agreement between two or more persons (individuals, businesses, organizations, or government agencies) to do, or to refrain from doing, a particular thing in exchange for something of value.

What are the Key Elements to a Binding Real Estate Contract?

  1. Offer and Acceptance: Original signatures with no alterations to the contract. If the original offer is marked up and initialed by the party receiving it, then signed, this is not an offer and acceptance but a counter-offer. Any final agreement should be reduced to a final writing and signed by both parties.

  2. Consideration: A bargained for exchange of something of value. Money is the most common form of consideration, but a promise to perform (i.e. a promise to pay) is also satisfactory.

  3. In Writing: A real estate contract must be in writing and it must:
  • Identify the Parties: The full name of the parties must be on the contract.
  • Identify the Property: At least the address, but preferably the legal description must be on the contract.
  • Purchase Price: The amount of the sales price or a reasonably ascertainable figure (an appraisal to be completed at a future date) must be on the contract.
  • Signatures: A real estate contract must be signed to be enforceable.
  • Legal Purpose: The contract is void if it calls for illegal action.
  • Competent Parties: Minors, mentally impaired, drugged persons, etc. cannot enter into a contract.
  • Meeting of the Minds: Each side must be clear as to the essential details, rights, and obligations of the contract.

What is a Lease Purchase Contract?

A lease purchase contract combines a basic lease contract with an option-to-purchase contract. The tenant/buyer pays to the landlord/seller a non-refundable option deposit that is applied to the purchase price of the home. The tenant/buyer then pays to the landlord/seller a sum that is typical to the rental amount usually on a monthly basis. A portion of that monthly payment is then applied to the purchase price of the home. During, or at the end of the lease period, the tenant/buyer has exclusive right to buy the home under the terms to which both parties have previously agreed.

In other words,

Lease + Option to Purchase = Lease Purchase


Jeff Beaubien, is the President and founder of Beaubien Investment Company in Howell, Michigan. He specializes in creative real estate techniques, but focuses on the most powerful technique of them all; the lease purchase contract.
As a result of his success in real estate, Mr. Beaubien is the author of his real estate course, The Lease Purchase Handbook.


© 2003 Yamon! Investments Incorporated. | Privacy Policy