Lease/purchase or owner finance options. Dave Ramsey purists need not reply..........

[Joanne]

Disclaimer: I have read ALL the DR books, was a member of the site, was a member at LLNOE, listened to the CDs and even still listen to his radio show. I *get* it. I just won't drink the kool-aid. I take what works and ditch the rest. My situation is so unique that cookie-cutter advice doesn't work. This is not intended to be a jawm thread, but I can anticipate some of the feedback that won't work and I'd rather not be bothered, k?

 

My life circumstance has unfolded in such a way that I will have to work until I physically can't work anymore. There is no retirement for me. If I use the debt snowball, I will not pay off my debt for 20 years. I am 46. The debt is mostly student loans ~ which I would do again in a heartbeat, legal, and medical debt. I have a little bit left on a vehicle. The one credit card is being paid monthly on a program I negotiated. Frankly, I will be acquiring another vehicle debt shortly. I will need 2 cars so that I can work and the kids can attend school. I have recently purchased a beater and it was a bad, bad, costly deal. I would have been MUCH better off taking all that money (initial and repairs) and putting it down on a used vehicle and getting a modest payment.

 

So.........last year, through the generous help of friends and family (here and other), we were able to move back to Harris County so that a significant part of Adrian's new medical bills were covered. We've been here going on a year. It's a dump of a house in a tanking neighborhood. Houston(metro) area is not a place were renting is cheaper (at least monthly). Mortgage payments and rent payments tend to be about the same.

 

I am thinking about an owner-finance or lease to own option. It seems dumb to move into a different rental, since moving always costs money. Something like this:

 

http://ourhoustonhouses.com/default.asp_Q_f_E_listings

[elegantlion]

A few considerations:

 

Some owner financing are 5 year loans, which at that point you have to refinance into your name.

 

Who holds the note? Is it put into your name immediately or do they retain title. That can affect some areas that would be worth contacting a lawyer about.

 

Also who are you making the payment to? directly to the mortgage or to the owner? I would want some system in place to ensure the owner was making the mortgage and you wouldn't end up getting booted from a foreclosure.

[Tarreymere]

We are in the fifth (nearly sixth) year of an eight year rent-to-own and we have had no complaints. We have a contract and we had it reviewed by a lawyer before we signed it. There were some points that we were advised to consider, but I really can't remember much about that right now. I do know that we did consider a few things, had a few things adjusted in the contract, that kind of thing, and that the lawyer was worth it to make sure we wouldn't get any unpleasant surprises later on.

 

Our payments are actually what we would have paid to rent this place anyway, so why not? The biggest concern we had was did we want to become responsible for maintaining and making repairs on the place, which we wouldn't have to do if we just rented it. It was important that the place was in good condition to begin with. I'm too tired to remember more right now.......

Edited July 29, 2012 by Rainefox

[melissad2]

The Remington Harbor Court house is my favorite :)

 

Do you know of a good lawyer who could look over the contract for you? Or would you do that yourself??

 

:iagree:

[Parrothead]

Spend the $200 on a lawyer to make sure everything is legit and go for it. :grouphug:

[MSNative]

A few questions came to mind when I read your post. Who pays for repairs while leasing to own? Do you anticipate being able to afford large repairs once you do own the home? Would owning the home make you ineligible for any of the benefits (medical coverage) that you are getting?

[trishhoward]

sister, I am sending your prayer. My dad did this option, because it was their only option at the time. With a lot of sweat equity he got his loan and turned out fine.

 

Be prepared, sometimes there is a lot of sweat equity required. Do all your negotiation up front.

[trishhoward]

definitely double check on who is responsible for the repairs. completely agree.

[Momof3littles]

I would definitely have anything you are considering reviewed by an attorney to protect yourself.

 

In this scenario, I assume you'd have an inspection and so forth? With the economy the way it is, in many markets I think there are a lot of houses that have had deferred maintenance. We moved into a rental short term in between selling a house in a different state and buying our new home. It was a nice looking house in a nice neighborhood, but it rapidly became apparent the LL had deferred a LOT of maintenance issues (roof, etc.) that needed to be done. I would make sure you know the condition of the house and have it inspected if it might end up being yours. If it needs repairs, at least you'll have some idea. Obviously not everything always needs repaired right away, but I'd want to know what I was getting into. The house we were renting looked decent at face value (actually it was a pretty high end house), but once we were in it a few months we started realizing there were a lot of "hidden" issues. The renters who moved in after us ended up buying from the LL. I hope they figured out what they were dealing with and priced that into the deal. I'm of the mindset it is always better to know. When we bought our current house I asked around for the pickiest inspector, and we were thrilled with the guy we hired. He was an extra 100-200 bucks, but in the grand scheme of things, a really, really good inspection is worthwhile.

 

If you rent to own, can you negotiate any repairs to the property up front?

 

Will you get inspections for radon, septic/well (if applicable), etc.?

 

Do you pay the property taxes in a rent to own situation?

Edited July 29, 2012 by Momof3littles

[Catwoman]

 

So.........last year, through the generous help of friends and family (here and other), we were able to move back to Harris County so that a significant part of Adrian's new medical bills were covered. We've been here going on a year. It's a dump of a house in a tanking neighborhood. Houston(metro) area is not a place were renting is cheaper (at least monthly). Mortgage payments and rent payments tend to be about the same.

 

I am thinking about an owner-finance or lease to own option. It seems dumb to move into a different rental, since moving always costs money. Something like this:

 

http://ourhoustonhouses.com/default.asp_Q_f_E_listings

 

Is the "dump of a house" the one you're thinking of buying? If so, the "tanking neighborhood" would really concern me, and I'd strongly suggest that you buy something in a more stable neighborhood, even if it was in a little more out-of-the-way location or was really tiny. Sometimes you can get lucky and find a 1960's or '70's house that is incredibly outdated, but that has been decently maintained, so you'll only have to eventually deal with cosmetic stuff (but the major systems are OK.)

 

I know it's stressful to have to look for a new house in the best of circumstances, and that you're already under so much pressure that I'm sure you don't want to add any more, but I'm very worried about you buying a house and having it almost immediately start to lose value. The real estate market is bad enough, but in a tanking neighborhood, it could end up being a real nightmare for you.

 

I really don't mean to question your decision; I'm just thinking that the easiest option (which is to buy the current house) may not be the best one. Is there anyone who can scope out some houses for you, or a Realtor that you really trust to help you find a better place?

 

I hope you're able to find a nice, safe place that you can afford.

 

I'm so sorry if I sound negative -- I truly don't mean to add to your stress, but it almost sounds to me like you're giving up a little because you're just plain exhausted, and I don't want you to make this kind of decision without looking at every option.

 

Sadly, the very worst time to have to make a decision like this is when you're already going through a major life change, but it sounds like you don't really have a choice. I wish there was someone to help you through all of this, and who could take on some of the responsibilities for you.

 

:grouphug::grouphug::grouphug:

[Cinder]

I have no advice; I just like your title. :D

 

I hope whatever you decide works out for your family. :grouphug:

[OnTheBrink]

I'm in the same situation. I'm at the end of a 5 year contract for deed (lease to own). The owner and I used an attorney to draw up the contract. In short, I'm responsible for all repairs and maintenance, but the owner and I split the cost of the first year's cost of a home warranty. Basically, I pay a co-pay for anything that breaks, including appliances, plumbing, electrical, etc. I can do anything to the house I want except alter the exterior in a permanent way (like adding on a garage or something) until I take over the mortgage. The interest rate is higher for a CFD than a regular mortgage. I put $10K down, which applies to my mortgage. For me, it was the only way to get a home without renting a dumpy apartment, which is all I would have been able to afford. My home payment is lower than an apartment's rent, by about $200.

 

Dave Ramsey may not approve, but life's rough and can throw curve balls, so you do what you have to. The only downside to something like this if you can't or don't purchase the home, you lose all the money you put into the down payment and the monthly payments.

[mrs.m]

We did seller financing (which one of the properties was listed as such) a very, very long time ago back when the market was at its highest. It played out just like it would any other mortgage and the seller fully owned the home he was selling. We did inspections, title search and transfer, etc. We owned the home in the end just as if we financed it through a bank. A default in payment would result in a foreclosure that returns the property to the financer. We had to pay for all repairs and up-keep just like any other home owner. And when we chose to sell, we paid out to our lender and kept the equity. The guy did it to make money on the interest from the financing. We paid our mortgage to him each month and he didn't care about anything else except that we kept the house insured and paid the property taxes. We had incentive to keep it nice (not that we wouldn't as renters) because the home was ours. A lawyer on both sides helped us reach this contract.

[kokotg]

Make sure you take into consideration all the costs associated with owning....not just the mortgage payments. Our mortgage payment for the house we're selling was MUCH lower than rent on a comparable house would be (because we'd done very well on the house we sold before that, and were able to put a lot of money down)....but when you look at how much money we put into it that we wouldn't have if we were renting, I doubt very much that we came out ahead on a monthly basis (and, of course, things being how they are, we're selling for considerably less than we bought for). There's stuff you can predict like property taxes, homeowner's insurance, etc. But then also stuff you'll certainly need to replace if you stay in the house long term.....HVACs might last 20 or 25 years and replacing them is thousands of dollars, cheaper roofs only have a 15 year life expectancy, and then of course all the smaller stuff--appliances, gutter cleaning, painting, plumbing and electrical repairs.

 

I've noticed a growing trend of people arguing that renting makes more sense than owning in a lot more cases than we're used to thinking. Of course, there are non-financial benefits to owning, too (freedom to do what you want, have pets, not be worried you'll be forced to move before you're ready), and those make it worth it to me even if we don't come out ahead. But from a purely financial standpoint, it's hard to argue that owning our house for the past 9 years has been a better decision than renting, even though we did everything "right"--bought below our means, put down a lot of money, had a 15 year mortgage, etc--even not taking into account the house losing value (had it GAINED value, it would be a different story).

[Carpe]

Rent/Lease-to-Own/Purchase deals are great for landlords, which doesn't necessarily make it bad for the renter/buyer, but frequently.

 

LtO rent rates are higher than comparable properties. The tenants are higher quality on average. In many cases the tenants become responsible for the property as if they owned it (maintenance, utilities, insurance, etc.). But many tenants cannot get traditional financing, so at the end of the lease the "buy-out" cannot be met. The tenants either re-lease, with a higher rent (because rental rates have gone up over the length of the lease) or a higher buy-out (property value increased) or both, with the hopes that they can get financing at the end of that term. Or the tenants leave and the landlord must return the money he was holding as the deposit on the property, but has not had to pay for any of the upkeep on the property for the length of the lease.

 

If you will not be able to get traditional financing at the end of the lease, it probably will not work out for you.

[MariannNOVA]

Others have given very good advice -- no need for me to repeat it.

 

Someone here said that life throws curve balls -- I couldn't agree more. I think that life also comes at us fast - and we have to think outside of the box.

 

When dh and I were in a similar situation, renting to own seemed to me to be an excellent idea. Unfortunately that was a few years ago and the idea had not caught on yet.

 

Making certain that you have limited your exposure as much as possible, I would say it makes sense.

 

:grouphug::grouphug::grouphug:

[Audrey]

Joanne, we are currently selling a house we had purchased in town at auction and fixed up. We are selling it as lease to own. We went through a lawyer to do it, and I would do it again in a heartbeat. It gives us the much needed return on our investment, and allows a family who could not get a home to own one.

 

Some things to ask about are penalties and term extensions. Find out or negotiate a reasonable forfeiture penalty. That is, if you leave the house, is all of the pay in forfeited as rent and is any deposit or supplementary payment forfeited. Term extensions can be written in, too. So, if you cannot make an annual supplement, can you extend the term of purchase or will you have to make it up sometime.

 

Also, clearly define the terms of maintenance responsibilities. Ours is that all maintenance and repairs are on the lessee, but we carry the insurance and be the primary beneficiary in case of claims. If a claim results in a payout that is not a total loss, then we must make the repairs stated in the claim. In case of total loss, there is another rider that is pretty involved. PM me if you need more details.

 

I would go for this arrangement from the other side, too, by the way. Good luck, Joanne. You totally deserve it. :)

Edited July 29, 2012 by Audrey

[EmeraldGirl]

We did this back in the 90s (LtO). I won't repeat all that has been stated. Please check on the laws in your state. We had a lawyer check the contract and details before we signed.

 

Two years later when we were ready to go to get a mortgage to officially buy the house, we were told that b/c of the laws in our state, the agreed upon rental amount which was to be applied to the mortgage in the form of a downpayment was more than the state allowed.

 

At that time, the maximum allowable rental payments to be applied to the mortgage could not be more than half of the total payments to the owner over the course of the lease. We were paying $600/month for rent which they would apply $500/month towards the mortgage downpayment. But only $300/month would be permitted toward a downpayment.

 

Thankfully, the owners were honest people and we drew up a backdated contract for the previous two years and adjusted the numbers to match what was acceptable in our state.

 

May the Lord bless you in this as I have followed your plight the past few years and have prayed privately for you. I don't post much as I am still learning how to properly respond in this type of forum format, with love and civility. You ladies have been extremely helpful in ways you will never know.

[Liz CA]

Are you asking if you should own or rent for the same amount? If the lease to own is the same or less, at least you could potentially own a house in 20 years or so. Given your circumstances, I would look for something that I can pay off as soon as possible - in less than 20 years if possible. It may be another "dump" but if it is livable, you will have money at some point to fix it up.

 

You may be at the point where you just need a roof over your head, plumbing and electricity in a neighborhood where people don't kill each other.

These are low standards but it sounds as though you need a home you can afford and own in twenty years or so instead of fighting ever rising rent.

 

With your recently acquired credentials, you should be able to get a decent paying job - if you don't have one already.

Is there any way to have all previous medical bills written off?