Q: I am considering a "lease-option agreement" to buy a home. What are some of the advantages and disadvantages of buying a home through this type of agreement?

A: A lease-option agreement combines a traditional lease between a landlord and tenant with the option or right to purchase the leased home. A typical lease-option allows a tenant to rent a home while maintaining an exclusive option, but not obligation, to purchase the home after a period of time. In some cases, the tenant will pay an initial deposit for the option. Some or all of that deposit, usually non-refundable, will be applied toward the purchase price at closing.

Lease-option agreements are sometimes used by tenants who are not in a position to buy yet due to credit issues or financial circumstances. Such an agreement may give the tenants time to improve their finances.

If the tenant does not purchase the home, however, the tenant usually loses the entire option deposit and any rent paid. The tenant also would not receive tax deductions because they would not be paying mortgage interest during the lease. Additionally, if the landlord loses the home, the tenant's entire investment might be lost.

Before signing a lease-option agreement, you should perform all necessary due diligence.

Q: What is due diligence?

A: The making of every reasonable effort to provide or acquire accurate, complete information.

Have a question you would like answered in this column? Please contact James J. Scavo at jscavo@wslaw.net or c/o Weinstock & Scavo, P.C., 3405 Piedmont Road, Suite 300, Atlanta, GA 30305.

— By Patrick I. Lucas, Esq., an associate with Weinstock & Scavo, P.C.; Plucas@wslaw.net; www.wslaw.net.

This column is designed to provide information in regard to the subject matter covered. It is not intended to render legal advice. If legal advice or assistance is required, the services of an attorney should be sought.