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Lease Purchase

The lease with option to purchase (Lease Purchase) is a lease wherein title remains with Seller (Lessor) and Purchaser (Lessee) occupies the property as a tenant while maintaining the option to purchase the property for a predetermined amount within a specified period of time. Often a cash payment is made to Lessor at the time the lease is executed. Also, all or part of the lease payment may be applied toward the purchase price should the Lessee exercise the option to purchase. In many instances there will exist an underlying mortgage(s) on the property.

The advantages of using Escrow Services to service a lease with option to purchase include:

  • Assurance that any underlying mortgage is paid, provided Lessee makes the required lease payments. This protects any option funds paid by Lessee.
  • Drafting of lease payments and direct deposit to Lessor's account facilitates collection of rent and timely payment to Lessor.
  • Independent third party account payment histories aid in obtaining conventional financing by Lessee to exercise purchase option.
  • Third party account payment histories provide independent evidence of Lessee's failure to pay as agreed under the terms of the lease should eviction become necessary.
  • Our years of experience in servicing wrap around instruments allow us to provide key insight into proper structuring of such instruments to ensure problem free servicing for Lessor, Lessee, and underlying lien holders.


Installment Option

Escrow Services, Inc. is the only commercial administrator that has the experience and expertise required to properly service Installment Option contracts. We have helped to facilitate thousands of option contracts and private mortgages throughout the country.

What is an Installment Option?

An Installment Option is a contract wherein payments are made in installments. Consider it a ''lease purchase'' wherein ''lease'' payments are replaced with interest payments. Just as with a Bond for Deed, a Memorandum of the contract is recorded in the public records to protect all parties.

The Installment Option contractually incorporates many of the positive features that are statutorily provided in a Bond for Deed contract in Louisiana, protecting both Seller and Buyer. Therefore, the Installment Option is an instrument used in lieu of a Bond for Deed outside the state of Louisiana.

Where We Come In

To protect all parties, a full title review and notarized documents are required. Escrow Service, Inc. a third party administrator, is appointed and becomes the owner's agent to handle property insurance, tax, and underlying mortgage issues. As with the Bond for Deed, we collect the payments, pay underlying mortgages, and issue IRS 1098 interest reports. In the event of nonpayment, the administrator sends the required notices.

When to Use an Installment Option

Owner Financing: Use an Installment Option whenever the owner will finance all or a portion of the sales price. Canceling an option for non-payment is much less costly than foreclosure.

Save Money: Use an Installment Option to save closing costs. When you buy or sell property under the Installment Option contract, you do not have to pay 'points', appraisal and survey fees, private mortgage insurance (PMI), or repairs required by the mortgage company before it will make a loan.

Mortgage Not Assumable: Use an Installment Option whenever an existing mortgage has restrictions against assumptions, land contracts, contracts for deed, Bond for Deed and transfer or beneficial interest under a land trust. The owner can 'wrap' existing mortgages within the terms of the Installment Option.

Purchaser/Property Doesn't Qualify: Use an Installment Option whenever the Purchaser or the property doesn't qualify for a loan. Many would-be Purchasers cannot qualify for a new mortgage... sometimes the property does not qualify... the reasons are endless. The terms of the Installment Option are strictly between the owner and the Purchaser.

Additional Information

Maintenance: The purchaser is responsible for repairs, maintenance, etc. after the closing of the Installment Option contract.

Insurance: Property insurance is issued in the ownerís name with purchaser paying the premiums and named 'Additional Insured'.

Tax Deductible: The IRS treats an Installment Option the same as an installment sale for interest and depreciation purposes.

Bankruptcy: In the event the owner files a bankruptcy action, the purchaser is protected by the U.S. Bankruptcy Code, provided the Memorandum of the Installment Option is recorded in the public records.

Default: The Installment Option allows the owner to cancel the contract and take back the property if payments are not made within the time allowed and without thecostly expense of foreclosure.

Contact us to let our team of professionals use their expertise for you.

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