a lease to own should be MORE expensive than a straight rental, not less.

I follow many house selling forums, and I can't recall a single lease-to-own story that resulted in a sale.

Bird in the hand? Hardly,seems like either option stinks,but perhaps they are BETTER then a stick in the eye

Stick in the eye is about where we are right now! 10 months on the market, priced too high during the tax credit season (learned too late about 'selling a listing')and now little to no traffic. And we have moved on to another house. Need to get some benjamins flowing in the door! I did notice in my research that lease to own usually went for more, but in this market, it seems worth encouraging a possible sale. As long as we retain the extra cash deposits. No? I trust garden web forums so that is why I'm posting. thx

lease to own causes all kinds of headaches,particularly when they eventually figure out they a) can't afford it,or B) realize the housing market has continued to lose value and renege or want to redo the original agreement

I would just rent it to the tenant with the best references at fair market rent with a one year renewable lease. If the couple who want lease to own are able to do that and then later are able to buy, they can make an offer when they have financing. Better to have a stable tenant and rent that covers your expenses than to wait on a lease to own that doesn't cover expenses. No advantage there for you at all. We have a house in a rural area that we would like to sell but are keeping our reliable tenants until the market there improves before considering putting it up for sale and risk losing the good tenants whose rent covers expenses.

thanks everyone for your wisdom and insight. and in the future, i'll refer to my situation as 'which stick in the eye is least horrible?"!

I'd make them both the same offer with the same contingencies.
X amount up front, X amount per month. Get a credit report on each of the persons involved. Write up a formal rental agreement with what you expect from them and what they can expect from you. Take a video of the house when they move in. Send them a copy, you keep a copy.
Put the rental money into an account and forget it's there till after they either buy or move out. Use it as one large chunk to either pay down your new house or take care of damages done on the old.

How about a third choice?... a Lease Purchase? A LP forces the renters to have some skin in the game. A Lease Option only gives them the first right of refusal if they do decide to buy.
A LP is nothing more than a signed RE contract that has a delayed closing, usually 12 months. Both parties sign a rental contract and the RE contract. If they close on the agreed upon date, then the deposit is credited towards the down payment and / or closing costs. If they do not close, they lose the deposit to you. A sales price is negotiated up front, an inspection is done up front, just like a normal sale. One possible glitch is that the home does not appraise to the agreed upon sales price after the rental term. Both parties need to agree that if this is the case, then both parties agree on the lender's appraised price. The rental term should be for market rate with nothing going towards the buyers down payment. Banks do not allow sellers to put anything towards a buyer's DP. The initial deposit should be in line with what the lender will charge them in 12 months... FHA is currently 3.5%. Make sure to hold this in an attorney's escrow account!!! That way both parties are made sure that it will be around when it comes time to either using it towards the DP, or to pocket it for the buyers not going to close.
The BEST part of this scenario is that once explained to the potential buyers, you will know right away how serious they are towards cleaning up thier credit, and purchasing the home.
Good luck.

thanks carol from ny and ncrealestateguy for your additional comments. i have been working my way toward your suggestions but like feeling that i'm going in the right direction! the renter is a pretty sure bet and would be very stable and responsible. do want to sell ultimately, but don't feel like be jerked around so agree that a big deposit down for the lease purchase is the way to go. i thought though that part of the rent could be put toward the final purchase - is that a state by state law?

We ended up leasing--there was discussion of a rent-to-own, lease sort of arrangement, but we didn't come to terms.

In retrospect, I'm glad we did not. The terms being discussed at the time were not favorable to us--we would have carried all of the risk.

IMO (not a RE type), if you're locking down a price in advance, or applying rent towards a down payment, that rent still needs to cover any necessary repairs/maintenance to the house. Yes, it could be considered that they are starting to gain equity with their payments--but the owner is still on the hook if anything goes wrong with the property. Unless the rent is greater than market, it seems to me that the owner has a lot of possible downside--but no protection against it.

We ended up leasing--a 3 year lease, in fact. A rental agent in our RE agent's office found the tenant (1/2 months rent), and did the credit check, etc. They've been there almost 3 years and are extended until the summer. After that, they're unsure--but we'll work with them, since we would certainly prefer they stay as long as they want. (They definitely aren't going to buy--they aren't going to stay in the area, but they have kids currently in school here)

We didn't want to be landlords--but given the current market, we'll probably end up continuing to rent the house for a while.

Update:
So the young buyer has decided not to accept our requirements for the lease purchase. I established the rent based not only on going market and our costs, but also on what it was going to cost him to buy the house - mortgage, FHA mortgage insurance, taxes, home insurance, etc. He decided it is too much house, exactly what I needed him to see. Obvs, we want/need to sell this house, but he really needed to be serious and realistic. Thanks for all of your collective advice.