HOW TO JUSTIFY NON-REFUNDABLE DEPOSITS?

[Asher Carr]

Hey evet,

I'm at work and out of no where I had this thought. For a rent-to-own property, is a non-refundable deposit ok? Though the buyers are not obligated to buy the property at the end of the term, should the upfront deposit be refundable like a normal apartment rental or could it be different because it is a home and there's more responsibility and different mentality about the property. What are your thoughts? Thanks.

[Wesley W.]

The non-refundable payment is not unreasonable at all.  They are paying an option premium for the right (but not the obligation) to purchase that property from you for a set price within a given time period.  By accepting this premium, you are obligated to sell the property to the option payer under those conditions should they choose to exercise that option.

It's really no different than stock options.  In financial terms, you are "selling a call" to them.  Ask your broker if you get that money back if you decide not to exercise it in the future. ;)