What does "Lease Option" refer to in real estate?

"Lease Option" refers to an agreement that allows a tenant to purchase the rented property at a later date. This type of arrangement combines elements of a lease agreement with an option to buy the property, which provides flexibility for both the tenant and the property owner. In a lease option, the tenant pays rent for a specified period with the added benefit of having the option, but not the obligation, to buy the property at a predetermined price within a certain timeframe.

This arrangement is particularly appealing to tenants who may want to eventually own a home but need time to save for a down payment or improve their credit scores. By locking in a purchase price during the lease term, tenants can also protect themselves from market fluctuations.

The other options, while related to real estate, do not accurately describe a lease option. An agreement to rent a property does not involve any purchase rights. A clause in a lease for lower rates also does not encompass the buy-out potential. Finally, a type of mortgage agreement is fundamentally different from a lease option in that it directly pertains to the financing of property ownership, rather than a rental arrangement with a purchase possibility.