Last year one of my customers wanted to get a lease with option to purchase home in Spring Hill Florida for his 91 year old mother.

The listing price of the home in July of 2008 was $309000. Mortgages owed by the seller at that time were $290000. As the buyers agent I informed my customer and the listing agent of the situation and suggested that we not go forward with the sale as there would not be enough equity to pay for title fees and commissions at closing.

To make matters more difficult the buyer insisted upon an appraisal two months before closing to determine the final price. My best guess is the property is probably worth $230000. This means the seller is probably caught short and the deal may not close because of negative equity.

The solution is probably to instruct the seller to ask their current mortgage holder for a short sale. If that doesn't work to demand for the option down payment back.

The moral of the story is that purchase options in a down turn market where credit and values can go awry is a big gamble for buyers and sellers alike.