- July 21, 2011 at 10:12 pm #41238
There is a company that wants to buy my home on a lease to own option. They will sign a lease with me for 2-3 years then cash me out at the end of the lease term. During the 2-3 year lease term, they in turn lease my house out to a family that has damaged credit but wants to buy the house. The 2-3 year lease term gives the tenants time to fix their credit. The tenants are the ones who ultimately buy the house at the end of the lease term. The company said that once they find a tenant they will guarantee me monthly rent payments, even if the tenant doesn’t work out and moves on. The company is also responsible for all repairs to the property and montly maintenance up to $ 200 a month. Here is a link to their website that gives some details.
My question is: Is this a scam of some sort? Are there any pitfalls I need to watch out for? I’d like to know from someone that has entered into this type of contract, or someone who does these types of contracts.
I have not looked over an official contract from them yet as we are not that far yet into the process. They still need to view the inside of my home before they even make an offer. And of course, I’d look over the contract carefully, or even have a lawyer double check it for me.
PS…Background info: I currently have a renter in the property who is moving out at the end of November. I am an out-of-state property owner. It would be very difficult for me to sell this home on my own in the current Detroit area real estate market.
Thanks.July 21, 2011 at 10:47 pm #178962
ONLY ONLY ONLY HAVE AN ATTORNEY HELP YOU. I’m not screaming, but I want you to listen carefully, and do not work with anyone without the advise and guidance of a lawyer. I can not tell you how many scams there are out there.July 21, 2011 at 11:24 pm #178963
You are about to have ghetto tenants in your home.
What if they do not pay rent?
I rented a house once. They took away stuff like MY ceiling fans. Not to mention my kitchen cabinets were destroyed.
My suggestion: rent on your own – to people with good credit.July 22, 2011 at 12:10 am #178964
It may not be a scam per se, but the exposure you have is considerable. By targeting damaged credit tenants, the company is creating a higher probability that you will have significant damage to the property. Contrary to the annecdotal information anyone sympathetic to the plight of those with poor credit will offer, the averages are telling. People with bad credit are much more likely to be people who make poor decisions in life. That includes taking in friends and relatives who will damage your property far beyond what the company you have found is going to be willing to pay for. The fine print in your contract is going to have an easy out for the company if the tenant trashes the place to the point where the company will no longer make money.
I sympathize with your situation, and you may be stuck going with a company like this, but look over the contract carefully and watch for the danger of getting stuck with a lot of damage in your property. I have had tenants do incredible amounts of damage in just one year.July 22, 2011 at 12:37 am #178965
The important part you need to recognize is that they have the OPTION to buy your house, they are not committed to doing so. Essentially, they get to use your house for 2 – 3 years and decide at the end if they want to purchase or not.
$ 200 a month is a drop in the bucket, tenants can easily outpace that figure. And you are on the hook for the rest.
Before you do so, you definately need to have an attorney review this, there are so many RE scams out there and home owners are unwittingly getting shafted by these “investment” companies.
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