lease/rent to own

Tmichael9 · Joined: 10 Oct 2006 Posts: 3

I live in maryland, and recently I came across a company that offers rent to own properties. THey say that you get to pick the home you want to buy, (they in turn by the property) you sign a two year lease, and during those two years you are in a program to help straighten out your credit. After two years you have the option to purchase the house for the price agreed at the begining of the lease. THe out of pocket fees are $1500.00 for the credit counseling and to get with the real estate agent (basically their charge for this service) $1000.00 earnest money when the property is found that you like, and the cost of the home inspection. The only reason why this sounds tempting to me is because I have to get my FICO score up before I can get financing for a home, also I have the opportunity to choose the house that I would want to buy if I could right now. However there is something that is making me think that this deal is tooo good to be true, also I want to know what happens if the owner no longer has the desire to sell after 2 years??? Anybody who has heard of any programs/companies like this please share your thoughts and experiences. Or if you think this sounds like a bunch of BS?

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Overall it's not a bad gig, just make sure you review the paperwork. I had someone walk in today that got told their house was being sold to the guv-ment because the current owner owed tons of back taxes and they wanted to get a loan on it. Their credit wasn't the greatest of course, but they weren't to happy when I showed them the 'lease with option to purchase' and told them that they were pretty much renting, but they should of course contact an attorney for a more professional opinion.

Most likely it's built into the contract correctly, just make sure that it is if you're going to do that with the idea of actually buying that place in a couple years.

They make money out of it because a lot of people that have poor credit simply don't ever get out of it. I used to think it was just a trap, that once you had the tools to get out of it it was just a simple maintenance issue. That's the case for some people, but *news flash* many are just lazy. So they get all kinds of money out of it then.

m2c · Joined: 03 Aug 2005 Posts: 937

The fees raise some cautionary flags but there are costs to cover. A similar operation that’s run around here is nonprofit based and has income limitations. Very dedicated folks and there are not only no fees but limited matched savings for the down payment.

Not everything can be free and the Maryland program may be perfectly “legit”. Just be careful.

gte843k · Joined: 24 Jan 2007 Posts: 4 Location: Norcross, GA

I just wanted to encourage you to make sure to fix your credit before hand. I know some great credit repair companies whom we use for our clients. Let me know if you'd like me to give you some info.

Lease purchases are great options to purchasing ahome if you have a bad credit. It's a bad option if you're not a deligent person and you don't think that you'll be able to pay a company or go through the grooling process yourself of repairing your credit. If you're the type of person that won't stick with it to repair your credit, just stick to renting but still repair your credit. That way, your down payment is not lost.

There are pros and cons to lease purchases. You just have to do a lot of research to find out if it's right for you.

Hope this helps.

ken(TX) · Joined: 23 Sep 2005 Posts: 184 Location: Dallas, TX

Tmichael,

I would suggest you not do it. The main reason is that if you have $2,500 right now to pay these people, odds are you could use it towards paying off collections or other delinquent credit items that would have a greater impact on repairing your credit for a purchase 2 years from now.

Make no mistake, this is essentially an agreement to rent now....buy in 2 years. Aren't you renting already? If not....go rent somewhere as the rental history will help you out. But it won't cost you $2,500 to go rent a house or apartment.

So the plan for you is to rent now....buy in 2 years. To make this more succinct, the plan is to make you the most eligible borrower possible in January 2009. right?

Parting with $2,500 to rent while someone over-charges you for a credit repair plan is not your best option. As Haplo put it, you would subject yourself to risk that the landlord doesn't pay their mortgage or taxes or in some way puts the home at risk of foreclosure even though you paid your rent every month.

You have to make your own decision but this is one of those deals that when I look at it, I don't see "too good to be true". What I see is "too good for the seller".

good luck.

DallasLoanGuy · Joined: 26 Sep 2006 Posts: 169 Location: Dallas, TX

these companies offering this service are not offering it out of the goodness in their heart.
they are in it to make money..... off of YOU

http://www.dallasloanguy.com/docs/about_credit.pdf

read the book i linked above about credit repair.

noone should pay a credit repair company.....

lil_oh_me · Joined: 04 Jan 2006 Posts: 35 Location: Grand Rapids, MI

In as much as you have a red flag raising in your mind on this you obviously are a person with self discipline. You are locking, it appears,
into a purchase price to be exercized 2 years down the road. Do you know what the value of the property may be in 2 years or how stable
the neighborhood is? If I were you I would want to have a title report
on the property I would be interested in purchasing via this method to
make sure that they can convey title 2 years down the road. I would
also want a look at the financial of the company because I would hate
to think they would be using the house I want to purchase as collateral
for their business dealings. Last but not least, I would want to hire an
attorney to protect my financial well being. When you add up the cost
to minimize your risk it's not such a great deal, I suspect.

Apply your self discipline to building up the amount you have in an
interest bearing account. Take on the task of managing your credit and
if it becomes a burden hire an attorney. I assure you the company you are looking at is only interested in helping you to the point you can qualify for a mortgage. You interest is in qualifying a mortgage with the most
favorable terms to you.

It's difficult when the nesting instinct takes over and you want to buy
a house to make into your home. You can do this in a way that the
home you buy is your castle and not an albatros around your neck.

ken(TX) · Joined: 23 Sep 2005 Posts: 184 Location: Dallas, TX

Tom,

Your e-book on credit is fantastic. That is a really excellent piece.

Ken