The Dangers of the Rent to Own Market
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Your credit is weak, and you are wanting to purchase a home. One of the options available to you is to rent a home for a year or two with the option to buy. During this time you work to repair your credit. The Boston Herald has a very informative article on the pitfalls of the rent to own marketplace.
But it turns out that there’s a dark side to lease/option deals.
Florida officials allege one major lease/option promoter defrauded dozens of people, pocketing their option fees but failing to transfer houses when tenants wanted to buy properties.
In Texas, widespread consumer complaints about lease/option programs even prompted the Legislature to pass a new law that takes effect today.
Under the enhanced statute, lease/option promoters can’t terminate contracts over minor lease disputes or late rental payments.
They’ll also need clear, legal title to any property offered for sale via a lease/option.
Texas legal-services lawyer Robert Doggett said lease/options ”had become a racket here. You had all these Mom and Pop investors who took seminars and learned to do lease/options as a way to make a million bucks without doing a lot of work.”
Mini Timmaraju, Texas legislative director for the consumer-advocacy group ACORN, said hundreds of families fell for schemes that ”put them into situations where they were paying a lot of money for something they’d never really get to own.”
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Comment by Ophiolite on 6 August 2008:
I find all of this very interesting. I have recently moved into a community that is considering offering lease/buy options, because they cannot sell the units (for a variety of reasons). One of the people here is telling them that they could collect the option money and spend it (even though they are in serious mortgage trouble). I have told them that this is a dangerous situation, because if the tenant decides to use that option money for their down payment and they don’t have it (because they decided to spend it), then they are in big trouble.
They are telling me that I don’t know anything about real estate (because I am renting) and that what they are doing is just peachy. After reading your posts, I admit I am even more concerned about their actions.