"I found a beautiful home for my family,"
Jose B. of Orlando stated. "It was the size we needed; it was where
we wanted to live...near schools; and it had a pool."
Further, Jose indicated "...the monthly payment fit our budget,
and we could afford the down payment."
And when Jose heard about the $400.00 per month rent credit,
his wife and he demanded to be shown where to sign on the dotted line.
They had heard enough. This was their home, and they wanted it now.
This was their dream home with a swimming pool and a huge monthly rent
credit.
Wow, their prayers had been answered.
However, Jose's brother pulled Jose aside before signing any paperwork
and handing over any money. Jose's brother insisted Jose and his wife
take a close look at this "deal of a lifetime."
Reluctantly, Jose and his wife agreed to temper their enthusiasm, praying
their family didn't lose the home to some other eager family as they
dug into the details.
Rent-to-Own Details
Rent = $1,750 per month; Down
Payment = $5,000; Purchase Price = $339,900
Sounds great so far, doesn't it? For as
little as $6,750, Jose and his family could get the keys to
their new dream home!
Wow!
However, once they pulled out their calculator
after five minutes of research, their joy disappeared.
Here's what they discovered, which absolutely
crystallized in their minds just how gimmicky the monthly rent
credit really is.
Reality Check
Investor had just purchased this home on 4/17/2006
for $278,100.
Investor wanted Jose and his family in July
2006 -- just THREE monthls later -- to pay $339,900
for this same home.
Just then, Jose and his wife realized the gimmick....
For the privilege of a "monthly rent credit"
of $400 or $4,800, the investor planned to walk away with $56,100
in profit, 339,900 - $278,100 (investor paid for the
house) + $4,800 (rent credit x 12 months' lease term).
You see, the investor had
really marked up this home over 20% and had simply tacked
the "oh so great" monthly rent credit on to the backside.
Great deal, huh?
A monthly rent credit is NOT a "rent
credit -- it's a gimmick!
|
But wait, there is more...unfortunately!
If this is not bad enough, Jose
and his wife dug a little deeper.
"We then actually read the
contract this owner-investor wanted us to sign. We discovered that if
we were late on just one payment, we forfeited the entire rent
credit," Jose lamented.
"We also learned the monthly payment did not include
taxes, insurance, and homeowner's association dues...another $250.00
per month. Suddenly, that $1,750 monthly payment was really
$2,000."
Fortunately, Jose and his wife had stepped back from their enthusiasm
to analyze this opportunity. In doing so, they perhaps avoided a nightmare
down the road when discovering the incredible "monthly rent credit"
was really a gimmick or even a scam.
But wait, there is even more...unfortunately!
If Jose and his wife had gone through the entire lease term paying
rent on time, maintaining the home as their own, and improving their
credit, they needed an an appraisal to get financing.
The contract stated that they would forfeit their $5,000 down
payment and all rent paid if they could not get financed by the end
of the term.
Wow, do you see the problem here?
Jose and his family would have had no control over market conditions
in providing a satisfactory appraisal.
As written, the contract penalized Jose and his family for the property's
failure to get a satisfactory appraisal.
By no fault of their own, if they had signed on the dotted line and
paid all rent on time during the lease term, maintained their home impeccably,
and improved their credit, they had no guarantee "their" home
would appraise at the end of the lease term.
This is b....a....d!
Here's the breakdown:
1. This near-tragedy started with a monthly rent credit gimmick.
Gimmick exposed.
2. Jose and his wife discovered the investor's outrageous profit
potential of $56,100. Greed exposed.
3. This unsuspecting couple then exposed the contract language about
"...forfeiting the monthly rent credit...." Scam
exposed.
4. Finally, Jose and his wife learned perhaps the most unpleasant shocker
of all....
Wait a minute, if the house does not appraise for $339,900
at the end of the lease term ---by no fault of Jose's and his wife---
they would lose their down payment.
This outrageous story goes beyond gimmick ...this tragedy, though detected
before Jose and his family handed over their hard-earned money and signed
a legal contract, destroyed their dream.
A real tragedy....
Please email
me with any questions about this or any other e-lesson. If you have
suggestions for other real estate or home financing reports, let us
know.
Mike Payne, a Realtor with Horizon Realty, specializes
in providing Rent
to own Florida Home || Florida Rent to Own Homes.
To read other FR*EE special reports about buying or selling a home,
visit Rent
to Own Florida | Florida Lease Options.
|
|
|
