About the possibility of renting with an option to buy

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Reference no: EM13281940

When purchasing a home, one occasionally hears about the possibility of “renting with an option to buy”. This arrangement can take various forms, but a common one is that the renter simply pays rent and may purchase the house at an agreed-upon price. Rental payments typically are not applied toward purchase. The owner is not permitted to sell the house to another buyer unless the renter/option holder waives the right to purchase. The duration of the option may or may not be specified. Supposed that a buyer is considering whether to purchase a house outright or rent it with an option to buy. Under what circumstances would renting with an option be a dominated alternative?

Reference no: EM13281940

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