Is “Lease to Own” A Scam?
We took the Aerial Tramway up the last time we were in Palm Springs. While up there, we met a cute young couple who live in Southern California. We joked, took pictures, and shared appetizers before we raced out to catch the next tram down. Of course I gave them my card. The girlfriend decided to give me a buzz today because she noticed that the back of my card indicated that I help people buy foreclosures and short sales in my area, Santa Maria CA and Orcutt CA. She wanted to run a lease option scenario by me. Unfortunately, she didn’t have the name of the company on her. But some company approached her about a rent to own arrangement where she would give them $160 and they would give her access to a database of homeowners who instead of getting a foreclosure would quit claim their house to you and you would just start making payments directly to their bank. Hmmmmm.
Well I told her that it sounded like a scam. Not a major league scam on the part of the people getting $160 for the “database” but there probably was a major league scam somewhere behind it. I explained that quit claim deeds and foreclosures aren’t typically a part of a lease option deal. Also, my opinion was that a lease option doesn’t solve the problem that is causing most of the foreclosures that I see – severe lack of equity and bad loans do — so I didn’t see lease to own as a real solution for many homeowners who were in distress. And finally, I told her that any time anyone is quit claiming this or that over to anybody, and that new “owner” doesn’t have a real interest in the property, it raises a red flag for me. Doesn’t mean it is fraud per se, but it does raise a red flag and I would have a reason to do a lot more investigation.
Of course, I asked her if her credit was poor because lease option offers are magnets for people with bad credit. Indeed, she had a bankruptcy less than a year ago, but just found out that she is pregnant, so of course they wanted to get into a house. I would hate to see a scammer take advantage of this wonderful couple’s desire to establish roots for their new family. They will, one day, be great first time buyers and I want to protect that future for them. There are legitimate lease option offers out there, but I do not think that this is one of them. A basic lease option deal is a lot less exciting than the scenario these folks described. She did the smart thing though – she ran it by a Realtor® and attorney that she trusted and it kept her from getting burned.
Copyright ©2011 Tni LeBlanc * Is “Lease to Own” A Scam?*
