Rent-To-Own Home Scams Destroy Dreams

Scammers in Florida steal more than dreams from people, whose misplaced trust in some "rent-to-own home specialists" leaves them without their hard-earned money and a home of their own.

"Caveat Emptor!" Let the buyer beware rings true in Florida during the state’s current blistering housing market, as people with damaged credit and unable to get their own home mortgages have turned to those offering "Lease-Option," "Rent-to-Own," or "Lease with an option to purchase" opportunities for home ownership opportunities.

Sarasota’s Mike Payne, a Realtor with Horizon Realty who specializes in rent-to-own home opportunities through their website, www.asolution4you.com, claims it has gotten more challenging for people searching for a home to separate the good guys from the bad guys in the rent-to-own business. "It’s horrible what’s happening to good people, who are making the mistake of trusting others to provide them with a fair deal on their new home. In return, many of these people are losing their money and, much worse, their homes to these con artists," Payne added.

When done correctly, Payne mentioned, families achieve the American Dream of home ownership by renting to own for a fair price and enjoying their home during the lease term as if it has been their own home while resolving issues, i.e. credit, job history, etc, currently preventing them from getting their own financing.

Tragedy Strikes…

In Florida, however, fraud and greed have joined forces with tragic results for many "rent-to-own" deals. Just ask Ivan and Levette Wheeler of Sanford, Florida, who pursued a rent-to-own home opportunity from a company pretending to help people with damaged credit:

"…I finally visited (web) sites listing different companies willing to work w/ your credit blemishes. They all wanted your personal information and some type of fee to start the process. We actually got suckered into a scam and lost $1200 to a fraudulent company that promised us a home of our choice and price. After losing $1200, our trust level dropped significantly and we became very skeptical about the so-called ‘Lease to Purchase’ or ‘No Credit, No Problem – Own Your Home Today!’ schemes."

As Mr. and Mrs. Wheeler tragically discovered, these scammers prey on people’s burning desire to get their own homes.

"We didn’t think our situation was so bad that banks would turn us down," the Wheeler’s added. "What we learned is that our damaged credit required us to take a loan with an outrageous interest rate, a huge down payment, and excessive fees. We didn't expect the type of loan for people with good credit, but we didn't expect to get hammered so hard. We looked at what that loan would've cost us and we couldn't believe it. We couldn't afford the bank's monthly payment, their down payment requirement, or the fees they were imposing on us."

For the Wheelers, losing hard-earned money forced them to be more careful before signing anything or handing over money.

"We knew we wanted to be homeowners, not renters. We also knew that despite a bad experience with a company pretending to offer rent-to-own opportunities there must be at least one reputable company out there actually helping people achieve their dream of home ownership," the Wheelers added.

"Every day, I hear tragic stories from people who have been ripped off or about people who have been ripped off," Payne stated. "It seems that everyone with whom I speak knows of somebody who has been ripped off by some person or company claiming to offer rent-to-own home opportunities. These victims are good people who simply have wanted their families to enjoy nice homes in nice neighborhoods. They do everything they’re asked to do with paperwork and money, and then some greedy person or company rips them off."

Simple cause explains fraud…GREED!

Florida is experiencing unprecedented growth in its housing market. The report, "Median Sales Price of Existing Single-Family Homes for Metropolitan (FL) Areas," released by the National Association of Realtors reveals price increases (% change) for the following markets for Quarter 3 (2004) - Quarter 3 (2005):

1. Cape Coral-Fort Myers, FL $194,800-->$277.6 = 42.5% increase
2. Ocala, FL 114.9 151.5 31.9
3. Orlando, FL 180.5 261.3 44.8
4. Palm Bay-Melbourne, FL 159.3 212.8 33.6
5. Sarasota, FL 285.9 353.8 23.7
6. Tampa-St.Pete-Clearwater, FL 167 213.5 27.8

Greedy people pretending to offer rent-to-own home opportunities do not want to leave even one penny on the table for a family desiring future home ownership. To keep from leaving even one penny, they will deceive, cheat, and steal from hard-working people who need a little time in a lease term before getting their own financing and their home in their own names.

Don't Get Ripped Off...

To avoid getting ripped off, Payne offers the following advice:

1. Do your homework by researching the company or individual with whom you are considering doing business.

2. Don’t fall for the "We’re not Realtors" line paraded by those who are not licensed. If you actually find a traditional Realtor who specializes in rent-to-own opportunities, choose the licensed person instead of the unlicensed person. You will NOT pay for the Realtor’s services – and you want the insurance policy that comes with working with a licensed person. It is more difficult, perhaps even impossible, to go after an unlicensed person who rips you off. If the person helping you with a rent-to-own home opportunity is a Realtor, that person is licensed by Florida and can lose his license if he misrepresents himself. As long as the Realtor specializes in rent-to-own transactions, you will benefit from the Realtor’s negotiating skills, contracts, MLS access, and real estate knowledge.

3. Conversely, don’t fall for the "I’m a Realtor; I can help you" line. If the Realtor does not specialize in rent-to-own opportunities, that Realtor is doing what so many Realtors do – deceiving you. Some Realtors will exaggerate the market value of a property in order to get a seller to give them a listing, knowing they can always come up with an excuse to go back to the seller to get the seller to reduce the asking price. Some Realtors attempting to represent buyers employ the same deceptive strategies. The bottom line is that the Realtor must specialize in rent-to-own opportunities or it won’t matter how many nice homes that Realtor can locate on his MLS. If you can’t qualify to buy the home on which the Realtor is representing you, then you cannot buy the home.

4. Get the future purchase price in writing. It MUST be locked in and it must be in writing in the contract! Do NOT sign a contract with a floating future purchase price, unless you know exactly how the future price will be determined and you agree to the calculation.

5. Read all paperwork very carefully before signing anything. As logical as this appears, people desperate to get a home with rent-to-own terms somehow throw this important suggestion out the window. They seem to think that they have to take unnecessary risks to get a nice home in a nice neighborhood. Not true! If you do not understand every word of what you are asked to sign, take the paper to your attorney. If the person offering this home with rent-to-own terms refuses to allow you to have the paperwork reviewed, leave that person’s office – don’t do business with that person. A legitimate rent-to-own home specialist will not have a problem with an attorney, family, and friends reviewing your paperwork if that will make you comfortable.

6. Be Patient. Do not allow somebody to pressure you into signing paper or handing over money. Often, people out to rip you off attempt to create urgency – that if you fail to buy at the moment you will lose the opportunity. Even in Florida’s red-hot housing market, if you are not convinced a particular home is the home for your family, another home will come along. Remain patient.

7. Do the math. Another sleazy trick used by the RTO scammers is to advertise a ridiculously low monthly rent payment on the home being offered with rent-to-own terms. They know your credit and financial situation will not allow you to afford the home once you attempt to get the home in your names. They set you up for failure. While you make all on-time monthly payments and maintain the property, the scammers know you will not be able to get the financing and/or afford the monthly payment when you attempt to get the home in your own name. Request a mortgage broker or loan officer assist you in forecasting your future payment before signing any rent-to-own paperwork. Confirm that you will be able to afford the home you desire.

8. Don’t fall for the "rent credit" scam. A monthly rent credit is nothing more than a forced savings plan in which you are overcharged each month in order to "reward" you at the end of the lease term with the money you have been overcharged. Do you require a forced savings plan? What these RTO scammers are doing is playing the numbers: they know that only 42% of all people on rent-to-own contracts ever make it to lease term. They’re hoping you are one of the 58% -- if you fail to make it to term, they’ll keep the money you’ve overpaid for your monthly "rent credit."

9. Ask the "What if…? questions. Before signing the paperwork verifying the term, the conditions, and the future agreed upon purchase price, ask the following questions:
* What happens if I’m not able to get my own financing at the end of the lease term?
*What happens if the property doesn’t appraise for the future agreed upon price at the end of the lease term?

The moral of the story…

You really can avoid getting ripped off by the scammers pretending to offer rent-to-own home opportunities. Understand and employ the strategies presented above and you will avoid the tragedy of losing your money or your dream of future home ownership.

Mike Payne, a Realtor with Horizon Realty, specializes in providing Florida Rent to Own Home | Lease Option Homes Florida opportunities. For more information, visit www.asolution4you.com.