Home Selling in 55449>Question Details

Pickled, Home Seller in 55449

Couple wants to rent-to-own our house. Are they scamming us?

Asked by Pickled, 55449 Sun Oct 18, 2009

Our home is currently on the market. We have been approached by a couple that wants to rent-to-own our house. They claim to be builder/developers that had 12 developments that foreclosed and now can't get a mortgage for 2 years. I can't find a website for their business. So I have 3 questions: 1. Are they trying to scam me? 2. If a person has a business foreclosure, will their house be taken? 3. And following a foreclosure is the wait time to get a mortgage really 2 years?

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Pickled - if they claim to be builder/developers there would be a paper trail of their properties/developments. Ask for references and some sort of proof they are who they say they are and then check with the MN dept of labor andi insdurty (link to their web site below) to see if they were actually licensed.
0 votes Thank Flag Link Sat Nov 7, 2009
1. Probably. 2. Payments not made yes. or their equity is over 200,000, most bus owners personally guarantee. 3. Minimum 2-3 years plus credit score back to 620. The rules are quite complicated and dependent upon type of business closure and foreclosure. It is way to specific a situation to make any conclusions. Your biggest worry, can or will they pay the rent. If they are telling the truth, their bill situation is probably a mess. Avoid at all costs. Extreme risk!
0 votes Thank Flag Link Mon Nov 2, 2009

It is obvious that these people are desparate to find a place to move in. I have the same experience with my rental properties. Fortunately, I can separate the goods and the bads early on.

To answer to your questions: 1. Yes, they are trying to scam you. 2. Yes, if they can't make their payments, they'll lose their house. 3. Foreclosures take about seven years before you can get a new mortgage, definitely not two years. A short sale will take about two years to rebuild your credit.
Web Reference: http://www.noukhaschka.com
0 votes Thank Flag Link Wed Oct 28, 2009
Hello Pickled and thanks for your post.

Obviously, something about these two has you concerned or you would not be questionning whether their offer was legitimate. Their business may not have had a website, but you can check with the County records to determine if a business license was filed or papers that might legitimize the potential buyers claims.

My colleagues have provided you with some very good information, however, if I were your agent I would advise you to continue to market the home to bona fide purchasers for value and to hold these two as "possible" purchasers should no one else step forward in the next 30 days. Do not engage in any business with "rent to own" buyers without a well-prepared contract that will protect you, your property, and your ability to sell in the future should these individuals not work out.

As for your other questions, at least here in California, unless the business "asset" includes the homes (and, in this case, the buyers did include their homes as assets), a closing of the business will not necessarily affect the personal property of the homeowner. For those who are sole proprietors, everything you own can be in jeopardy if the business closes and there are insufficient funds to cover the debt, which is why bankruptcy was created. If these individuals were in the business of "flipping homes" (a popular pursuit for many) and lost the homes when the market changed, they will be unlikely to obtain a loan for between 5-7 years after a foreclosure. If there were 12 homes that foreclosed, I'd assume that their getting a loan will be closer to the 7 year time line than the 5 year. If the individuals have "stellar credit" (over FICO 760), then a loan might be offered within 3 years, but its unlikely that a loan will be available in just 2 years after any foreclosures.

Personally, selling a home is hard enough without needlessly adding "hurdles" to the successful completion of the transaction--such as added length of time (2 years), potential problems with the buyer, etc. Consider your choices very carefully before proceeding!

Grace Morioka, SRES, e-Pro
Area Pro Realty
San Jose, Sunnyvale, Cupertino, Santa Clara, California
0 votes Thank Flag Link Mon Oct 19, 2009
Answer to question #4.
Q. If I wait 2 years will they buy this house from me if its value has dropped even more than it has now?

A. No, they will just keep renting OR walk away completely. You are risking a lot of loss if they rent. You can not sell for at least 2 years and if prices drop more you will be stuck. They will not buy the house as they can buy elsewhere cheaper. You will have to sell if you can at an even lower price. If prices go up ( no way in my view) you will lose that appreciation as they can buy at the old cheaper price.

Question #5
Q. What happens if they stop paying us rent? So 4 months from now we have renters and no rental income?

A. You now have to evict them. A legal process that could take months. All the time not getting a penny in rent. At the same time they trash your house and you are even further behind.

question #6
Q. Financially what does it mean if we do this deal?
A. You could potentially lose this house. If they do not pay rent you still have to pay the mortgage. You could suffer damage that could cost thousands if they abuse the house. Then you could not buy another house because all your money is tied up. If you did buy a second house now you could easily be stuck with 2 mortgages that would drive you into bankruptsy. A very dangerous situation for you and your finances.

Question #7 Are we really that crazy to consider this?
A. you have to answer that for yourself. I just want you to look at possibilities. Plus if these people lost a business and a house why would you think they will pay you for rent? Their past does not suggest good results.
0 votes Thank Flag Link Sun Oct 18, 2009
Chances are, they're not going to buy your house. So ask yourself - do you want to rent to them?
0 votes Thank Flag Link Sun Oct 18, 2009
Probably not a scam but make sure you get a good contract. Ezlandlordforms.com can help you put one together. Work with your agent to make sure you get a solid picture of where they are at financially. You may also have a due on sale clause on your mortgage so have that checked as well.

Joel Friday

Web Reference: http://JoelFridayHomes.com
0 votes Thank Flag Link Sun Oct 18, 2009
You may not be able to buy a new house if you rent your old. Lenders used to count 75% of your rental income as an offset from your old house's PITI - these days that's a lot harder to count.
0 votes Thank Flag Link Sun Oct 18, 2009
Hi, get their information and run it on BBB. Also, ask for references such as Realtors and Loan officer.
Ask for their developments and ask your Realtor to help you on see how real is it.
Have your heard about Contract for Deed? This way, you could ask for a "larger: down payment and "protect" your investment.

1,- I do not know.
2.- Bussines foreclosure, do you mean bankcruptcy? It depends if the home was a collateral on the credit line, I guess.
3.- Yes and no. It could be the limit time to buy again, but it does not mean that credit scores and income will be on target to purchase.
0 votes Thank Flag Link Sun Oct 18, 2009
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