Plenty of people looking to buy a home in Upstate South Carolina ask me about rent to own or lease purchase. But are they scams?
This morning I received an email from a person looking for rent to own homes. I am constantly getting emails from people looking for this type of deal. There is a reason I avoid these types of deals!
No matter how badly you want to own a home today, this type of financing is not always the answer. Ask yourself: Why is someone willing to sell me a home in a way that does not benefit them as much as it seems to benefit me? Do you really think they are doing this out of the kindness of their heart?
Talk to Your Lender!
The first step in buying a home is talking with a lender. At least take the time to see what they say! Even if you are unable to obtain a mortgage from a reputable lending institution, you will at least know the reasons why.
And then you can work on improving your credit. There is absolutely nothing wrong with renting while working to improve your credit and saving more down payment! It is much better to wait until you are ready than to rush into such a major financial decision and become the victim of a scam.
Heck, some people rent all their lives and there is absolutely nothing wrong with this either. For some people, renting is just a better decision. I rented for many years because I liked the idea that I could quit my job, pack my car and move 1000 miles at the drop of a hat. And I did it several times!
Pretty hard to do that if you must sell a home! But I eventually grew older, a little wiser and settled down. I found the love of my life and an area that I was happy to stay in the rest of my life. So buying made sense, but only after I talked to my lender and investigated my mortgage options.
Low Down Payment?
If you have not saved a down payment that will more than cover the normal sellers expenses, why would they be willing to take a chance on you? As much as I wish the world was a better place and people did not lie, and people did not take advantage of others for their own benefit, it happens. Why let your eagerness to own a home before you are ready be your downfall?
If you do not have more down payment than what the seller would get as deposit from a renter why would they want to sell the home to you? Think about it, if the normal deposit is first and last months rent, and you are not offering a lot more than this as down payment, why would a seller accept it?
The seller may be planning on you NOT being able to keep up your end of the deal so that you lose your down payment and any extra you have been paying each month.
Many rent to own deals will have a monthly payment that is higher than the normal rent for a similar property and the extra you are paying is supposed to apply to the purchase price when you do buy the home. Sounds great as long as you can qualify for a mortgage at the time specified in the contract.
But if you cannot get a mortgage, all the money you overpaid every month may be forfeited! So not just your down payment, but also the extra money you paid every month is gone.
At one time, in this area, there was a guy doing a boatload of rent to own transactions. Most never closed, and the reason why was the inflated purchase price. Even if you can get a mortgage when it comes time to exercise your option to purchase, if the purchase price of the home you have been “renting” is well above what the property will appraise for, no bank will lend you the money.
And then the seller keeps your down payment, all the extra you paid every month, and you have to find a new place to live! And the seller still owns the home and pulls the same scheme again on another buyer that just had to try a rent to own purchase. The seller will of course say they did nothing wrong, that the buyer is an adult and read the contracts-but do you really think they did not do anything wrong?
Is Rent to Own a Scam?
So is rent to own always a scam? No! But maybe if you Google Rent to Own Scams and see that what I am saying has been said many many times by other people in other places!
It can work, but there are many many problems for both the buyer and the seller with rent to own homes! I could go on and on with the various pitfalls of rent to own but I think it might be better if you hear it from someone else besides just me.
I am sure you have heard of HUD. If you are not familiar with HUD they are a government agency that exists to increase home ownership, support community development and increase access to affordable housing free from discrimination. So is HUD going to lie to you? NO! They are not in the business of selling homes, they are in existence to protect you! Not to make money!
Why not check out the HUD website about buying a home and get some of the best non-biased information about buying a home that you can find anywhere. Did they say anything about how rent to own is a good idea? NO! Did they even mention it? NO! Why would they promote a method to scam people?
So after checking out these websites, and researching rent to own, you have decided that you still are going to go ahead with one a rent to own home? Then I have one last suggestion:
Hire an Attorney to Represent You!
When I say hire an attorney, I mean do not use the seller’s attorneys! You must hire an attorney to work for you and make sure you are not taken advantage of. Also do not sign the paperwork or contracts and then have the attorney look at it! Do not sign anything until after your attorney says it is OK!
Why is Mark They Telling Me This?
I am a REALTOR so it goes without saying that I think that buying a home is a great idea. But if you are not ready to take on this huge financial step, you cannot rush it!
My ability to sleep soundly at night because I know I have not taken advantage of anyone will always be more important than making a commission check. But you need to know the ugly but honest truth about rent to own deals:
They Are NOT as Good as They Sound!
Plus I am tired of getting the emails and feeling bad for these people. I know they will not believe me and are determined to own, no matter what. Well with this blog, I have officially warned the world.
I am NOT Handing You the Rope
If you choose to hang yourself, I am not handing you the rope! From now on when people email me about rent to own homes, my reply will always be a link to this blog.
Sure, rent to own might work out in everybody’s favor sometimes. But the truth is if a deal sounds too good to be true, it is. If you are not financially ready to buy a home then maybe owning a home is not right for you today. There is a world of difference between owning a home and renting.
We were all babies once and we all had to learn to crawl before we walked. It is no different with real estate.
So if you are looking for Rent to Own or Lease Option properties please understand that
I CANNOT & WILL NOT BE ABLE TO HELP YOU!