The Dangers of Rent-to-Own Agreements

you homeownership is such a part of the American dream and everybody wants to try and get to that goal buying a home is the most complicated legal transaction most people will ever engage in in their lives some sellers and rent to own transactions take advantage of that and they create deals that are unfair to the buyers my name is wilmarie serrano I am one of CLS clients um and I'm from Philadelphia I wanted to buy a house because I have two children I didn't want to keep paying rent and I wanted a better future for my kids there was my first time dealing with real estate and the purchasing of a house they said I needed better credit I had a friend who had spoke to me about this rent-to-own thing and I wanted to see and I wanted to try it out because she had already done it and I thought it was awesome they made it seem really easy and really inviting I'm Jennifer Schultz I'm a senior staff attorney with community legal services I'm in the home ownership and consumer rights unit there and I have a focus in dealing with home ownership issues as well as consumer rights issues and I do a lot of work on with rent to own agreements the law actually doesn't recognize the term rent to own people use it to describe a lot of different transactions where a person is trying to buy a house but they're going to be paying a monthly payment towards the purchase price and at some point they will get a deed once they're done paying the law calls these installment sales agreements even though the law recognizes installment sales agreements I would say that there are a lot of problems and very frequently the transactions are not done in compliance with the law the seller frequently is the one drafting all of the documents and they tend to write things heads I win tails you lose and they pick and choose half from the landlord-tenant relationship and half from the buyer seller and what that means is that they are putting all the burdens and responsibilities of ownership including repairs and improvements to the property taxes and maybe other debts and they expect this buyer to pay all of that the other thing some sellers do is they ignore the rights that buyers are supposed to have when a problem develops they're supposed to have the right to be able to cure the payments so if they miss a few as long as they can get back on track in a timely fashion it's not supposed to cancel the deal sellers are also supposed to give people specific legal notices and those are very frequently ignored in the process of removing her someone from the property they're also supposed to give people access to the rescue friend program through the state the homeowners emergency mortgage assistance program it's very rare that buyers are informed about their right to access that program there's also a legal process for cancelling these contracts called ejectment but that is very typically skipped and instead sellers will go to landlord tenant court which is a shorter time frame and with fewer rights it may often fall upon the buyer to show a history of payment that could go back several years or maybe even decades and it can be difficult for people to maintain their records effectively enough to address all of those disputes I did not know nothing about title search or mortgage or going to the City Hall I never had the experience and I never had that guidance to you know speak to me about these things because it's my first time and I was learning to do everything on my own when a person does a mortgage transaction there are a lot of things that happen behind the scenes that are designed to protect the buyer and the mortgage company one of those is a title search and title insurance and that makes sure that when you're buying the house and paying the money that you're getting the whole house that there isn't somebody else out there who says hey I own part of that and make sure that other mortgages are paid that outstanding taxes are resolved that outstanding water bills are resolved because you don't want to be buying someone else's problems on the house that travel with the house but in a rent-to-own transaction that step is very frequently skipped buyers don't know to ask about it sellers don't offer that information and sometimes what that can lead to is a situation where if there is a pre-existing mortgage you could have to wind up buying the house twice once to the seller and then you have to pay the mortgage to keep the house going in rent to own transactions because you don't get indeed you don't get full ownership until you're done paying a lot can go wrong before that point and it's very rare that I've seen people who actually get deeds I've maybe only seen three in my career the agreement was that I pay five hundred dollars down and five hundred dollars a month and I had to be responsible for all the repairs on the home and that by one year I will be owning the home the lease was month-to-month it just said I was responsible for everything they weren't responsible for anything else I was paying extra for the water and they were never paying it I learned that they were not making payments on homes my house was not the only one we was in a deep hole it was scary after that I got a sheriff cell in the mail I read it and I knew what it meant but I wasn't sure what was happening after that I started telling them why am I getting these papers but I never got a response the only thing that worried me was my kids because you know it was our home that we was already comfortable in and we were making it beautiful for us and to think that in two months or three months or four months we were not going to be there anymore and the house was not going to be ours at all and that I will never own a home after that I got mail from CLS and there was Jennifer Schultz I did reach out to wilmarie she was engaging with a speller who was doing the same transaction over and over and we identified a large group of houses that were involved with these foreclosures and we sent outreach letters to all of the people in those properties inviting them to come speak with us we ultimately made contact with about 150 people out of the 300 properties many were vacant by that point I think some people got scared and left when they saw sheriff sale notice is if someone is in a rent-to-own agreement I would say the first thing is don't panic I know we spend a lot of time talking about the perils of these transactions but if things are on track keep them on track don't just stop making payments until you've consulted with an attorney and that would be the next step I'd say anybody who has a rent-to-own agreement really needs to run it by an attorney and here at CLS and also at our sister organization Philadelphia legal assistance and we have to save your home filly hot line here in Philadelphia any one of those avenues can get people to contact with an attorney for free to look over their papers and understand what's really going on and then they can make informed decisions about how to move forward right now I am rent-to-own is almost the same thing but the legal way you know I signed papers jennifer has my back when everything i'm fixing everything on my own and it's just everything is written in paper that's the most important thing I will own my home about 2019 that's going to be my deadline I have to have everything by then and the house will be mine I hope to have this home and have it beautiful for my kids so they can have somewhere to live and somewhere to be in and comfortable and everything would be good you

Channel: Community Legal Services of Philadelphia

Views: 285,516

Rating: 4.7750907 out of 5

Keywords: rent, law, legal aid, rent to own, real estate, mortgage, philadelphia, lease, lease purchase, buy a home, homebuyer, bad credit, no credit, lease option, ugly credit

Id: BBoAkglLM0I

Length: 8min 33sec (513 seconds)

Published: Thu Aug 04 2016