Lease to Own Home Ownership Model (aka Rent to Own Condos) is a Grey Area PLUS Home Owner Soon explains why this model works for both buyer & seller

Lease to Own or Rent to Own Options are a Grey Area

According to Pieta W of the Georgia Straight: On October 6, the day the TSX tumbled 1,106.95 points, Jon Murray’s phone was ringing off the hook, as it has been for the past six months. The real-estate consultant specializes in helping people – whom the banks won’t touch due to poor credit, recent immigration, lack of income proof or other reasons – buy their own homes. The strategy is called “lease option”, otherwise known as “rent-to-own” or “lease-to-own” homes. The creative financing thrives in an economy when home sellers are having trouble selling and buyers face a risk averse mortgage industry. “All day, every day, I’m on the phone because so many people want to do it,” Murray told the Georgia Straight, noting that about 100 realtors in B.C. are negotiating these leases. “Just in the last six to nine months, the lease-option or rent-to-own/lease-to-own market is starting to get really hot because there’s lots of houses not moving. The privately contracted deal is pretty simple. The home buyers seeking the rent-to-own or lease-to-own lease option puts about five per cent of the price of the home to “secure it”. Then he or she moves in. Over a period of about two years, the home buyer pays an inflated “rent”, part of which goes toward equity in the house. At the end of that period, if everything goes well, the homebuyer gets a traditional mortgage from the bank. For example, at strategichousing.ca, which specializes in lease options or rent-to-own home purchase models, a seven bedroom home with two suites in Surrey real estate market can be leased fro $2,840 a month. Of that, $950 per month goes toward equity. The rest, $1,890, is considered rent. Although lease options are relatively new in Canada, San Francisco-based real estate agent John Reed has watched them for about 25 years. He wrote about them in his 1998 self published book, Single Family Lease Options, now in its fourth edition. Reed thinks they should be illegal. “It’s generally a scam down here,” he told the Straight on the phone from his home in Alamo, California. “in 90 to 95 per cnet of cases of lease to own or rent to own lease options, the lessee never exercises the option to buy. So they lose the front-end money, which was $5,000 to $25,000 and they lose the rent they paid… it’s a heavy duty outrage.” Reed notes that even though lease options are somewhat regulated across the U.S., with 45 states with statutes in place and two federal laws pending, most home buyers who get involved in lease options and rent to own models don’t have the wherewithal to fight for their rights when the deals sour. “They think they’re just tenants,” he said. “So when they get evicted for being a day late with their rent, the agent gets to keep $30,000. They are preying on unsophisticated newlywed couples.”

More about the Lease Options Home Buying Model

In Canada, lease options and rent-to-own homebuying models occupy a hazy legal zone. They’re not covered by the Real Estate Act, according to Anthony Cavanaugh, the communications officer with the Real Estate Council of B.C. In addition, lease options or lease-to-own contracts not covered by the Residential Tenancy Act, according to the Tenants Rights Action Coalition spokesperson Tom Durning. “If it sounds too good to be true, it probably is,” Durning told the Straight. “you should get a lawyer before you sign anything, and you’re crazy if you don’t With five per cent down and these low interest rates, why rent to own?” According to strategichousing.ca owner Andy Santoso, the reality in 2008 is that 40 per cent of Canadians don’t qualify for a traditional mortgage. That’s where lease options and rent-to-own home buying models can help. “Home ownership elevates your social and financial well-being,” he told the Georgia Straight, explaining whey that 40 per cent shouldn’t be content to just rent. Sam Ryan, owner of lease2ownbc.com told the Straight he researched lease options and rent-to-own contracts thoroughly before opening his business this May. Since the real estate market slumped, he noted, interest is booming in lease options in Canada. Given the Conservative government’s cancelling of the zero-down, 40 year mortgage, as secured by the Canada Mortgage and Housing Corporation, he said, “people are more concerned about being able to get into a property rather than the actual price of it, as long as their payments are affordable.” Murray, owner of Jowen Investments and Consulting Group (jowen.ca) admits that there can be problems with unethical lease option agents and rent-to-own contract models. Individuals should protect themselves, he suggested. But in a real estate market were the banks are cracking down on who can borrow, he said, lease options and lease to own are certainly the present reality, and they may be the future too.

Why Rent When You Can Own? Rent To Own Homes Across Canada

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Be a Home Owner… Very Soon through Rent to Own or Lease to Own Model

By Sharon A. More and more renters who dream of owning their own home, but face some financial obstacles, are turning to HomeOwnerSoon.com. Launched in 2006, the company features two rent-to-own programs that make it possible for those who’ve been rejected for a mortgage by the big banks to buy a home in a timely manner. “Many people have difficulties obtaining conventional bank financing,” says Guy Lew, the company’s credit manager. “We fill a need in the marketplace for those who want to own a home, ut can’t obtain financing from major financial institutions.” HomeOwnerSoon.com clientele include those who lack an established credit history, don’t have enough money for a down payment ot quality for traditional bank financing, are self-employed or small business owners, or possess credit challenges due to job loss, health issues, divorce or bankruptcy. Those who think they’ll be ready to purchase a home within two to three years can take part in one of two rent to own or lease to own programs offered by HomeOwnerSoon.com. The Rent to Own Program enables participants to choose a property from among the approximately half dozen listed on the company’s website. They make a small down payment that is credited to them as a deposit that will form part of their overall equity in the property that they are lease to own. They then begin making monthly payments, which include a rental payment and a Monthly Option Credit payment (typically about 20% of the rental payment), which is saved and credited towards the purchase price of their property.

Benefits of Rent to Own Models

Rent to Own participants enjoy the benefits of a guaranteed purchase price, even though they won’t purchase the property for a while; equity appreciation right away; and affordable monthly payments. Most popular, however is HomeOwnerSoon.com’s Buyer Selection Program, which works the same way as the Rent to Own Program, but allows clients to select almost any home they wish in Canada, whether it be available through MLS or private sale. “About 90% of the time, our clients gravitate towards our Buyer’s Selection Program,” says Alex, the company’s relationship manager. “The terms are exactly the same, except people have total freedom in choosing their own home. From what I’ve seen, this is a unique program in the marketplace.” The easy qualifying process means that as long as interested individuals can afford the monthly payments, they can sign up. Once they do, they receive valuable advice and coaching from HomeOwnerSoon.com credit experts on debt consolidation and credit repair and optimization – this helps them be better prepared when, at the end of the program, they approach banks for mortgage financing. “We go through their credit bureau report with them, and if their beacon score is too low, we offer tips on how they can improve it,” says Lew. Once clients are on the road to home ownership, he says, they can enjoy the tremendous benefits that accompany it.

“If you compare owning versus renting, home ownership always increases your overall net worth, helps you build equity, and customize your home according to your needs,” says Kluge. So far, hundreds of aspiring home owners have enrolled with HomeOwnerSoon.com, including many young families, and their feedback has been overwhelmingly positive. “people don’t believe how easy it is, that they can choose any home they wish, a detached house, condo or townhouse, new or resale, and that they can make their dreams of home ownership come true,” he says. “They are very grateful to us for helping them achieve that.”