I am trying to fin out if in the state of CA, does the owner of a property who is offering a lease option to buy get to pocket the initial option to buy deposit or does it have to go into an escrow account until the sale of the house? Same thing with any additional amount above the rent, does this get deposited into an escrow account as well?
5 thoughts on “Lease Option to Buy a Home Deposit in CA, Is this deposited into an escrow account?”
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It does not have to go into an escrow account. The lessor often uses the option money/rent credit to cover any shortfall in mortgage payments and it’s credited if you exercise your option as a discount at the end of your lease.
Example:
You agree to a 1 year lease option with a purchase price of $200,000
You pay a $5,000 option and $1500/mo with $300 rent credit. At the end of a year you will have $8600 towards the purchase price. $5000+$300×12
You will be able to buy the property for $191,400. If the house is still worth 200k that’s your down payment money, if it’s worth more then you are in a better position. If it’s worth less then you may not decide to exercise your option and you lose the $8600.
The seller does not have to report the option money or rent credit as capital gains until you exercise your option so to answer your question directly, it’s upfront profit.
If you are interested in a lease option in California please contact me.
you have to talk to the owner and whats in the contract.
It is done by agreement of the parties. I have never heard of anyone escrowing any part of the payments, and I would not consider a demand that I do so — the agreement would provide for complete forfeiture in the event of default, and to have an escrow would be pointless.
depending on the contract, i suggest if you go that route, get a contract lawyer to review the details with you…one that specializes in lease to buy options….one so you are legally protected and two, to help you from the unknown….an investment of $500-600 could save you several thousand………
as far as i know the deposit can be kept anyway the owner of the house pleases and only has to be able to make it available upon optioning…the same with the overage that goes towards the down payment……which is also why i suggest you be legally represented verses fending for yourself….if nothing more the lawyer will at least be able to explain to you the details with no hidden agenda…….verses being told only enough to sell you on committing as a realtor may do…..good luck
you can check out to the following site http://realestatepropertynews.com/buy-a-home-deposit-in-CA.html