A lease options is an agreement between a buyer and a seller allowing the buyer a period of time to rent the property before closing on it. Some reasons for lease optioning is to allow the buyer time to clean up credit to raise down payment money. Sometimes it is to allow the buyer to sell or close on another property.
The terms of a lease option are negotiated by the buyer and seller but typically include part of the rent given back at closing to the buyer for closing costs or down payment. The price is usually set at the time of acceptance of the agreement.