Lease-to-own: Controversial thread topic

[perfectfire]

I noticed that Ardell had a post about Lease-purchases and how they could save or at least help out the housing market. As of now there's 198 comments on the post and I didn't bother to read past the first few. However I'm skeptical that lease-to-own deals will have any impact on the market. We always joke about homeownership being like renting only with a bigger monthly payment, but in a lease to own situation that is exactly the case. It's like taking the higher cost of ownership and combining it with the non-ability to modify the house as a renter.

For example there's this one lease-to-own ad that turns up on my craigslist searches everyday that just isn't going anywhere.

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They want a $4,995 downpayment and $1850/month for 990 s.f. with $300/month going towards the purchase price of $451,500 in 1 year or $474,075 in 2 years. The effective rent payment is 1550/month which is way too high for a house that small on a small lot with no garage. And the purchase prices are too high right now let alone in 1 or 2 years.

Seems like just another way to dupe a clueless buyer into overpaying for a house.

[Civil Servant]

Of those 198 comments, many of them are from a single participant who really seems to have it in for poor Ardell and who, in his online presence there and on the PI blogs, has rather a bullying, hairsplitting yet poo-flinging persona in general. (IMHO.) So don't misinterpret the comment volume. Of the lease-to-own situation I too am skeptical, though I know that those more informed (like Ardell!) may disagree on a case-by-case basis. Personally I find your math solid w/r/t the listing below.

[The Tim]

[deejayoh]

Methinks that the two parties posting the most on that thread seem to have much time on their hands. Maybe it's just that work is slow....

[Hyperbola]

[perfectfire]

[explorer]

Agreed that the house "value" may not be what it will actually sell for. Especially when you really have no previous history of the value to go on right now. We are in new territory in a lot of things. Past performance is not a guarantee of future results, and all that...

Having said that, I have never seen a lease option that I would consider fair to the renter/buyer, as most of the time, the purchase price set at lease start is way too high to be worth it. It often ends up you pay an extra premium and you don't want to excercise the option. You are paying money for nothing.

Not to say there might be some good deals there, that seems unlikely in the current economic climate. In the current declining market, I would never consider a lease option to be a good thing for the renter/buyer. Unless you set the purchase price about 25% lower to reflect what it will more likely be in two years

OTOH, seller financing might be more attractive to me as a potiential buyer...