What does the term "lease option" refer to in real estate?

The term "lease option" in real estate is correctly described as an agreement that allows a tenant to rent a property with the option to purchase it later. This type of agreement combines elements of both leasing and purchasing, giving the tenant the right, but not the obligation, to buy the property at a predetermined price within a specified timeframe.

The essence of a lease option is that while the tenant occupies the property, they also have the chance to acquire it, typically at a price agreed upon when the lease option is executed. This arrangement is particularly attractive for potential buyers who might not be ready to purchase immediately due to financial constraints or those looking to test out a property or neighborhood before committing to a purchase.

In comparison, other options present different concepts: one involves simply renewing a lease without the purchase component, another pertains to a seller's commitment without buyer obligation, and the last suggests a co-ownership structure among tenants, none of which encapsulate the concept of a lease option.