Lease To Own Answers Some Housing Woes
Builders of homes and condos in at least one market are trying out lease-to-purchase offerings to spur sales. According to a Business Journal report three builders are hoping to clear out some of the 20,300 new homes in the Atlanta metro area. Elsewhere one builder has skipped lease-purchase and moved directly to renting some of its new homes.
Even investors who had purchased large numbers of homes during the boom times with the expectation of flipping them are turning them into lease and rental properties. According to an article in the Dallas News there are some high-end homes that never were lived in going to the lease and rental markets at prices of $4500 and up per month. At the same time new tract homes are also being turned into rentals. One marketing person in the Dallas market claims 90 percent of her calls are from people wanting to lease. And that’s just a plain lease with no purchase option at the end of the lease term.
In North Carolina at least three different developments are advertising lease-to-own homes. In this scenario a non-refundable down payment that is credited to the purchase price is collected at the time of closing. Purchasers who fail to purchase the home at the end of the lease loose that down payment.
Now, there is a whole movement behind this effort. One such multi-faceted entity that has sprung up in Dallas is called Community Empower and it bills itself as “America’s fastest growing homeownership network.” What exactly is the network? Basically it appears to be a number of lenders including Citimortgage and Wells Fargo, along with some mortgage insurers, home builders, investment bankers and a team of “counselors” that are all ready to get people back into home ownership through the lease-to-own route.
Basically this is kind of like home ownership on training wheels. People qualify for the lease-to-own program and get into the home under a lease with no down payment. Then, over a period of 18 months they are enrolled in the entity’s “Score Manager” program that helps them to improve their credit rating so they can assume the mortgage at the end of the lease period. There’s also a “nominal” assumption fee when they take over the mortgage.
This looks like a win-win for everyone except there is no detail about what happens if the people don’t manage to improve their credit ratings. As these schemes proliferate across the country I guess we’ll have to wait for the headlines a couple of years from now to find out just how that will turn out.
Will they read: “Lease-To-Own Home Ownership Programs Achieving 95 Percent Mortgage Turn-Over Rate;” or “Lenders, Builders and Insurers Petition Congress for Help With Mounting Housing Crises.”
