Slaughtering Lambs For Fun & Profit

By
Real Estate Agent with Tierra Antigua Realty - Downtown AZDRE# SA582422000

Lets face reality here:  no matter how much somebody wants to buy a home, not everyone is in the financial shape to do so.

Nevertheless, in our "gotta have it now" society, profiteers pop up to indulge people's impatience and stupidity.  In just about every town in America, you'll see stores offering "No credit, bad credit - take it home today" plans for everything from CD players to computers, couches to cars, washing machines to wheels...and houses.

Sure, its easy--just sign on the bottom line, make these easy weekly payments that sound like chicken feed (until you add them up) for the next 325 years, and you too can be the proud owner of a brand new TV!  Oh yeah...that TV cost us $400, but you'll end up paying $6000 for it by the time you actually own it.

In some states, by law the rental center has to tell you how much it will cost you in the long run, some don't...but there's always some sort of gloss over that total - something like, "if you want to buy it early, just pay 50% of the balance left on what you owe."

"Cool!  I'm no fool," the customer thinks, "when I win big at BINGO or get a good scratchoff ticket - I'll just pay it off...& make out like a bandit."  Yeah, right.  Read the fine print.

No Criminals SignEnter the real scam:  Rent-to-Own Homes.  Now that screwy loans aren't all over the place as much, you see these signs on vacant lots, in shopper ad sheets, bus benches & on the radio - all touting how easy it is to get your own home NOW, with no credit check, EZ Payments, yada yada yada.

I've read many of these contracts.  Not a single one offers any protection to the buyer/tenant.  They are all designed for the borrower to fail...because that's where the money is.  The money isn't in actually selling someone a home, the profit is in churning through prospects like a meatgrinder, getting the "down payment" over & over again.

Highly inflated values & exorbitant payments "while you get your credit repaired enough to get a regular loan" prey on victims, coupled with a time limit on when financing can be secured...or all is forfeit & the tenant/buyer is evicted.

Why not just hit yourself in the face with a sledgehammer?

To prove my point, just take a look at this lawsuit filed by Arizona Attorney General Terry Goddard today:  PDF  The Arizona Daily Star also quotes Goddard as saying that the behavior of the defendants is "Unconscionable" Article  Does this really surprise anyone?  Not me...I'll bet that this is just the beginning. 

Official AZ State Photo of Attorney General Terry GoddardSome of the victims were even put into homes already in the process of foreclosure!  How sleazy is that?  Arizona Public Radio stated today that out of 270 buyer/tenants taken in by this bunch, only 1 actually was able to eventually purchase a home.

Wonder how many of the "investors" who were lured into putting their name on the line in this easy-money scheme are facing foreclosure themselves?

Greedy people preying on the weak & stupid will always be around...as will those who readily serve up as fresh victims of the next scheme.  It is good for all of us to be reminded of this in the headlines every now & then.

As professionals in the industry, it is our responsibility to let our clients and prospects know about this kind crap.  I won't represent anyone in a rent-to-own purchase or sale.  Never have, never will - and I've told people that.  It may not be illegal all of the time, but it surely isn't ethical.

Go Get 'Em Terry!

Posted by

TucsonKent Signature
Specializing in Buyer & Seller Representation in the Tucson, Arizona real estate market.


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All original material written by Kent Simpson unless attributed to source.©2012,2011, 2010, 2009,2008,2007

"Never forget - Real Estate Is About People"

 

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Topic:
Home Buying
Location:
Arizona
Groups:
Dedicated Bloggers
Diary of a Realtor
Realtors®
The Lounge at Active Rain
Tags:
scams
rent to own
arizona attorney general
ethics

Comments 11 New Comment

Rainer
178,990
Erik Hitzelberger
Louisville - Middletown Real Estate
RE/MAX Alliance - Louisville REALTOR-Luxury Homes

I guess I'm with Ron on this one.  The integrity of the parties (and the strength of the contract) make a big difference here.  I can see many ways where a contract for deed or lease option can be a win-win.  However, wherever desperate people congregate, vultures circle.  Unfortunately, many buyers don't perform the due diligence required to protect themselves.  

July 10, 2009 12:19 AM
Rainmaker
243,613
Kent Simpson
Real Estate Is About People
Tierra Antigua Realty - Downtown

Ryan - read the AG's complaint.  It is amazing what the allegations are!

Erik - thanks for dropping by.

July 10, 2009 12:23 AM
Ambassador
226,839
Ryan Shaughnessy
Broker/Attorney - Your Lafayette Square Real Estate Partner
PREA Signature Realty - www.preasignaturerealty.com

Kent - The complaint is an interesting read.  I have seen mortgage fraud schemes very close to this... What I find interesting is the market manipulation aspect of the scheme.  It sounds like they were reporting in MLS or a COV inflated prices and then using the inflated prices as comparables. 

July 10, 2009 11:14 PM
Rainmaker
724,210
Gabrielle Kamahele Rhind
Broker/Owner
KGC Properties LLC, Tucson Property Management & Real Estate

GOOD MORNING KENT! I'm one of the "fingers and toes" -- I've done lease purchases with my own personal properties and even if they did not work out - it was written fairly to both sides so that the only thing that was a disappointment was that it didn't work out - rather than it being a financial loss to either side.  The key is to be honest and fair from the get-go - if there is not a chance in heck that someone is going to get a loan even in a year - just don't even go down that road with them.  Greedy always gets caught sooner or later -- Gabrielle

July 11, 2009 09:43 AM
Ambassador
1,662,636
Dale Baker
New Hampshire Relocation and Views Info Blog
Baker Energy Audits and Commercial Properties Inspections

Howdy there Kent

My friend, you sure are right. Most of these kind of setups are just that. A setup for some of the greedy folks to just, to make money over and over on the same place.

As usual a real fine post for folks to read, and learn from.

You take care, ya hear!

God Bless America

July 14, 2009 10:18 PM
Rainmaker
243,613

Kent Simpson

Real Estate Is About People
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