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
Real Estate Is About People

NAR® Board of Directors 2013-14
AAR® Legislative Policy Committee 2013-14
Inside Tucson Business "Up & Comer" 2014
Greater Tucson Leadership Class of 2012

 


Visit our facebook pageLink to our YouTube Channellink to Kent Simpson's LinkedIn profileFollow the TucsonKent Group's Twitter Feed
Bookmark and Share

web counter

All original material written by Kent Simpson unless attributed to source.©2007-2014

 

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
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

Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the tree to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Show All Comments
Rainer
86,440
Ron Parise
LocateHomes.com - Cape Coral, FL

I bought my first home using not a rent to own contract, but something similar...a land installment contract, also called contract for deed. There is little protection for the buyer in these deals either but it worked out for me. As with any contract, the protection is not in the words on the paper but with the integrety of the parties. 

Jul 09, 2009 11:44 PM #1
Rainmaker
250,508
Kent Simpson
Tierra Antigua Realty - Downtown - Tucson, AZ
Real Estate Is About People

I'm glad it worked out for you, Ron - I'm sure there are some folks out there who do practice rent-to-own with integrity...but you can count them with fingers & toes.

Jul 09, 2009 11:50 PM #2
Rainer
226,839
Ryan Shaughnessy
PREA Signature Realty - www.preasignaturerealty.com - Saint Louis, MO
Broker/Attorney - Your Lafayette Square Real Estate Partner

Kent - Lease purchase and lease option agreements are fairly common in our area.  Where I see the reoccurrence of conduct best described as fraudulent is the contract for deed scenarios.  The contract for deed scenario is fraught with problems.  The worst case was a real estate agent who purchased the homes with seller financing and then resold them on a contract for deed basis.  He stopped paying on the note, sewer bills, taxes, etc. - piling up liens on the properties.  At the same time, he collected the installment payments from his purchasers.  In the end, the properties ended up in tax sales.  The original seller didn't want to foreclose and the buyers couldn't afford to pay the liens and lost 100% of their investment.

Jul 10, 2009 12:02 AM #3
Anonymous
Anonymous
Anonymous

Kent,

Seems to me buying everything on credit and easy puchase on everything including houses is mainly what caused this mess. You can't really believe that a couple making $15 an hour each, with no down payment belong in a $400 K house.

Jul 10, 2009 12:15 AM #4
Rainmaker
250,508
Kent Simpson
Tierra Antigua Realty - Downtown - Tucson, AZ
Real Estate Is About People

Ryan - I've seen lease options work out well, but not once have I heard good things about lease purchases...until I wrote this post.  I would have to take a really hard look at the contract, and the advice of a trusted real estate attorney before I'd even think about putting my name on the line as representing either party in the transaction.

Too much room for failure...and litigation.

Terry - sounds like 2005-6!

Jul 10, 2009 12:18 AM #5
Rainer
226,839
Ryan Shaughnessy
PREA Signature Realty - www.preasignaturerealty.com - Saint Louis, MO
Broker/Attorney - Your Lafayette Square Real Estate Partner

The other area of fraud is the off the books soft second deeds of trust where the price is inflated, the downpayment is loaned and seasoned, and the second is not included on the HUD-1. 

Jul 10, 2009 12:18 AM #6
Rainer
179,085
Erik Hitzelberger
RE/MAX Alliance - Louisville REALTOR-Luxury Homes - Louisville, KY
Louisville - Middletown Real Estate

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.  

Jul 10, 2009 12:19 AM #7
Rainmaker
250,508
Kent Simpson
Tierra Antigua Realty - Downtown - Tucson, AZ
Real Estate Is About People

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

Erik - thanks for dropping by.

Jul 10, 2009 12:23 AM #8
Rainer
226,839
Ryan Shaughnessy
PREA Signature Realty - www.preasignaturerealty.com - Saint Louis, MO
Broker/Attorney - Your Lafayette Square Real Estate Partner

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. 

Jul 10, 2009 11:14 PM #9
Rainmaker
748,357
Gabrielle Kamahele Rhind
KGC Properties LLC, Tucson Property Management & Real Estate - Tucson, AZ
Broker/Owner

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

Jul 11, 2009 09:43 AM #10
Anonymous
Anonymous
Anonymous

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

Jul 14, 2009 10:18 PM #11
Show All Comments
Rainmaker
250,508

Kent Simpson

Real Estate Is About People
Tell Me More About Tucson Real Estate
*
*
*
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the umbrella to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase: