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Lease w/option to buy is a sucker's bet. You get all the risk and no reward, doubly so now that prices are dropping. If prices were going up and you could lock in a price then great, but that's no what's going on now. The owner gets all the advantages of ownership and none of the risk.
B.A.C.A.H.
2009 Dec 26, 3:03pm
How would a lease w/option to buy look if the risk and advantages were turned around so that the leaser got all of the advantages and the owner/seller got all of the risks?
justme
2009 Dec 27, 5:00am
If any of the rent is going towards the purchase, it had better be paid into an airtight escrow account.
Done!
2009 Dec 27, 6:17am
It's for idiots to play beat the clock. They get to pretend they are buying for 5 years, while they pay a low rent. The mortgage is based on a fixed 30yr apr but there's a balloon in 5 years.
Most people that opt for these kinds of deals have shoddy credit, and it is a guarantee that their credit will still suck in 5 years, and will not be able to obtain a conventional loan, and they will ultimately loose every thing back to the "REAL" owner. The mortgage/rent/lease payment is usually ridiculously low anyway, most of which goes to the interest. In five years time there will be very little equity to the would be new owner, so coupled with low credit score, and no equity to off set the risk that person stands a snowballs chance in hell in actually getting approved in 5 years.
The guy doing this gets two things, a higher down payment than would normally be required for a renters deposit, and he gets 5 years of a guaranteed occupant. THAT IS IT! The fool living in that house is only fooling his family, and will have some splainin' to do when their crap is being tossed to the curve in 5 years.
It is just as predatory as any bank practice.
Going through property rental pages on craigslist today. Seems there are 2 kinds of ads for rental houses. One is the seemingly normal ads, many with some sort of discount hook like free 1st month etc. They seem to be priced a bit on the high side- 2000-4000 per month. Guess they're hoping to get somebody to pay the mortgage they can't afford.
The second bunch are homes that are offering some sort of lease option to buy. It seems the number of these have increased exponentially in the last several months. These are are renting apparently quite cheaply in nicer areas. Now of couse the devil is in the details of deals like this. Most have a little statement about helping the current owners credit by taking this preforeclosure. In the past deals like this were supposed to take a certain amount up and above the stated rental rate to be put toward the down payment on the house. Good luck with that working out. Would be interesting to find out what the asking prices are on some of these places are but I bet they would make you jump through flaming hoops to find out. Bet they aren't cheap.
Many of them are looking for someone to do a shorterm lease. Now I don't know about you but I don't live out of a suitcase and moving every year is a pain in the ass and expensive to boot. Seems to be some desperate not well thoughtout hail Mary move by lenders to me.
Got any thoughts on this?
#housing