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.
Enter 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.
Some 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!