Lease purchase agreement is a legal document that helps the buyer to have a good understanding about the nuances regarding his purchase. The real estate field and the lending business have their own intricacies which may not be easy to understand for a green horn investor. The agreement helps both the seller and the buyer. Sellers can gain the best market value, while buyers get enough time for repayment of loan according to his or her purchasing power.

Lease purchase agreement determines the counters of the payment plan, like the rent and what can be done in case of defaulting etc. It is always advantageous to have a clear cut and legally registered written document than wrangling over issues at a later date.

Let us put lease purchase agreement like this - it gives legal permission to the seller to allow the buyer to occupy the property on rent till closing. There are many buyers amongst us who are not willing or unable to close immediately, but want to buy the property. The agreement is basically suited for such people. This trend is becoming increasingly common because many of us has started thinking that renting is beneficial than buying in the short term.

Usually the times agreed upon to close ranges between twelve to twenty four months. Once agreed upon the period, the buyer cannot close earlier. Some sellers allow lengthier tenures, depending upon the market situation. The buyer has to pay a purchase deposit, usually at 3%, which is added to the price of the property at the time of closing. But one thing has to be noted here - the money is non-refundable if the buyer defaults. Hard bargaining can sometimes bring this rate higher or lower.

The biggest advantage accrued to the seller through lease purchase agreement is that it gives him the best price available. He can ask for an even higher premium if the agreed upon period is extended by mutual consent. Another advantage is that the lease amount would be practically higher than the current rent levels because the tenant, who is the future owner of the property, has to look after the maintenance and related aspects of the property.

But the buyer also gains from the deal. It helps them save for the full payment and repair past credit defaults. The best part is that you would be forced to save money which you would otherwise have splashed elsewhere.

In short, it is a win-win situation for all.