Last week we looked at lease-purchase agreements and saw why they are becoming increasingly popular in metro Atlanta. Here are some typical questions that are asked about the subject of lease-purchase arrangements:

Q: You said that lease-purchase agreements often require the buyer to pay a down payment or a nonrefundable fee. Why can't the renter get this back, and how much is this amount?

A: While every part of these contracts is negotiable between the parties, the seller typically seeks a nonrefundable fee from the buyer as an indication of the buyer's sincerity. The higher this amount, the greater the confidence the seller has that the buyer will eventually buy the house. In exchange, it would seem appropriate that a buyer who makes a significant down payment with no expectation of refund could negotiate for a contractually specified price that would allow a bargain purchase anytime over the next three years.

Q: How would things be different under a lease-option agreement?

A: The word "option" means that the buyer has no legal obligation to purchase the house but has a protected opportunity to do so if he chooses. The option may specify the terms and conditions of the available purchase, but if and when the option expires, the opportunity is usually gone.

Q: Is the price always set upfront?

A: It certainly can be. But many lease- purchase agreements include price adjustment mechanisms, which cause the specified price to adjust with inflation or move up by a set dollar or percentage amount with each month that passes. I have also participated in a lease-option agreement where the parties agreed to each have the house appraised when the buyer decided to exercise the option. The contract stated that, so long as the two appraisals were within 10 percent of each other, the purchase price would be set as the average of the two. Fortunately, the buyer's appraisal came in slightly higher than mine, so both of us were happy with the sale price.

Q: Is this sort of arrangement fair to both parties?

A: It depends on the goals and plans of both parties. As long as both parties go into a lease-purchase agreement fully knowledgeable about their responsibilities under the contract, then we can assume it is fair if both parties agree to it. However, I must say that these agreements can be quite complex, calling for serious financial consequences if one party fails to perform or another party decides to live elsewhere. This is why it is so important for both buyer and seller in a lease-purchase to have their attorney fully explain the contract.

Q: Do real estate agents usually offer to negotiate lease-purchase contracts?

A: Typically not. Because most real estate professionals are compensated by commissions from sales, they are often discouraged from pursuing lease-purchases in which the sales commission may not be generated for another three years, if at all. In addition, know that agents are not lawyers. While most real estate agents have had training in how to help buyers and sellers fill out forms in typical sales situations, they are not qualified to draft complex lease-purchase agreements, nor to offer advice regarding them.

Q: What percentage of lease-purchase agreements eventually result in a real estate purchase?

A: That figure would vary dramatically with the motivation of the owner of the property. If an owner only wanted to fill his vacant house and offered an option as a way of attracting a renter, and he truly did not want to give up ownership, I suspect that the likelihood of an eventual sale would be less than one in 10.

In contrast, if the owner was truly motivated to sell and was willing to offer generous inducements to a renter while that renter improved his credit and built up a down payment, then the chances might be as high as one in two. Remember that in the world of real estate, three years is a long time, and people's lives are constantly changing. The same is true for their real estate needs. Investors I talked to around Atlanta say that about one in three agreements eventually turns into a sale, and that it's hard to do much better than that.

Find previous articles by John Adams and more home buying advice on the

ajchomefinder mortgage center.

For more Atlanta home buying resources, check out the 2008 Atlanta Home Sales Report.