Rent-to-own Article

From: Boyler Room


I was recently faxed this article by a tenant in a lease option I had going. Here is the article:

HOME SCHEME WARNING
A housing scheme which the Attorney General says preys on the disadvantaged had been uncovered in Adelaide, reports Eleanor Miller:

A rent-to-buy housing scheme in the northern suburbs is being investigated by the State Government and national consumer and business watchdogs.
Under the scheme, buyers believe they are renting to buy a house but in fact still have to pay a substantial amount of, if not the full, purchase price at the date of settlement, 10-15 years down the track.
Attorney General Trevor Griffin issued a warning in the Legislative Council on November 13 that a rent-to-buy property scheme, copied from interstate, which "significantly disadvantaged purchasers", had started operating in SA (see inset story).
He said the scheme was being investigated by the Office of Consumer and Business Affairs, the Legal Services Commission, the Australian Competition & Consumer Commission and the Australian Securities and Investment Commission. Mr Griffin said he was aware of at least one house being sold in the northern suburbs under this scheme.
"It has been suggested that the vendors may have bought the rights to use the scheme by attending a 'get rich quick' type of seminar touring the state", he said. "What is of greatest concern is that it appears that this scheme deliberately attempts to avoid many of the consumer protection mechanisms provided by a number of SA Acts.
"... the scheme could be said to prey on those in the community who are unable, for whatever reasons, to secure a home loan but nevertheless wish to own a family home.

Both Napier MP Annette Hurley (Labor) and the next Labor candidate for Napier Michael O'Brien said they were aware of at least one resident, in Davoren Park, who had bought through the scheme.
The News Review Messenger attempted to contact the buyer but learned they had left the property after realising the true terms of the sale agreement.
Buyers "thought they were under the impression they were purchasing their house form the time they made the first (rental) payment", Ms Hurley said.
"They thought they were eligible for the First Home Owners Grant and wrote to the Treasurer but he wrote back and said it wasn't mortgage-type agreement."

Inset story:

Attorney General Trevor Griffin described Rent-to-Buy schemes to Parliament:
• Purchase price in today's dollars but purchaser has no ownership rights to property until after settlement.
• Settlement delayed for 10-15 years.
• Purchaser moves in and rents house from vendor until settlement.
• If vendor has mortgaged the property and the mortgagee forecloses prior to settlement, the sale to the purchaser is cancelled, the deposit and all past rental payments are lost and the right to remain in occupation is gone.
• The vendor can cancel contract at any time but the purchaser cannot and must buy their way out of the sale.
• Penalty provisions if settlement brought forward.
• No resale by purchaser prior to settlement.
• Rental payments are not instalments - rent does not come off the purchase price.
• Purchasers not protected by Residential Tenancies Act even though they have a rental agreement.
• Rental payments above true market price.



This is the entire article. It appeared in the "News Review Messenger" but I'm not sure of the edition or date.
Half of those issues brought up by Trevor Griffin are a load of crap. If people ARE doing that then they are not doing it legally, and as a result may end up causing a lot of problems for the rest of us in the near future.

Boyler Room
 
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Reply: 1
From: Peter Hood


Article particularly salient and a warning to you "get rich quick scheme"
devotees.
Having witnessed first hand, events as described in the article, I questi=on
intent behind dealings of some our very own forum members.

Rent-to-own have a great niche if REAL value is provided to the "buyer".
Where there are clearly stratospheric hurdles for the buyer-tentant to
overcome during the course of their lease / option, then you would questi=on
the motives behind the scheme's promoter.

In fact, the motives have been outlined during a meeting in Melbourne by =one
promoter - i.e. make life difficult for tenant so that they are "squeezed="
with repayments, thereby delivering an abnormal return for promoter by wa=y
of 150% of current rental market, plus the property shall revert back to
promoter in the event of default.

Some regulation into "wrapping" is urgently required.

I'm sure long term investors take a dim view on this style of consumer
preying.

My name may be HOOD, but this practice is the reverse to ROBIN!

-----Original Message-----
From: propertyforum Listmanager
[mailto:listmanager@bne003w.webcentral.com.au]
Sent: Wednesday, 28 November 2001 22:25 PM
To: Recipients of 'propertyforum' suppressed
Subject: Rent-to-own Article


From: "Boyler Room" <boylerroom@iprimus.com.au>

I was recently faxed this article by a tenant in a lease option I had goi=ng.
Here is the article:

HOME SCHEME WARNING
A housing scheme which the Attorney General says preys on the disadvantag=ed
had been uncovered in Adelaide, reports Eleanor Miller:

A rent-to-buy housing scheme in the northern suburbs is being investigate=d
by the State Government and national consumer and business watchdogs.
Under the scheme, buyers believe they are renting to buy a house but in f=act
still have to pay a substantial amount of, if not the full, purchase pric=e
at the date of settlement, 10-15 years down the track.
Attorney General Trevor Griffin issued a warning in the Legislative Counc=il
on November 13 that a rent-to-buy property scheme, copied from interstate=,
which "significantly disadvantaged purchasers", had started operating in =SA
(see inset story).
He said the scheme was being investigated by the Office of Consumer and
Business Affairs, the Legal Services Commission, the Australian Competiti=on
& Consumer Commission and the Australian Securities and Investment
Commission. Mr Griffin said he was aware of at least one house being sol=d
in the northern suburbs under this scheme.
"It has been suggested that the vendors may have bought the rights to use
the scheme by attending a 'get rich quick' type of seminar touring the
state", he said. "What is of greatest concern is that it appears that th=is
scheme deliberately attempts to avoid many of the consumer protection
mechanisms provided by a number of SA Acts.
"... the scheme could be said to prey on those in the community who are
unable, for whatever reasons, to secure a home loan but nevertheless wish= to
own a family home.

Both Napier MP Annette Hurley (Labor) and the next Labor candidate for
Napier Michael O'Brien said they were aware of at least one resident, in
Davoren Park, who had bought through the scheme.
The News Review Messenger attempted to contact the buyer but learned they
had left the property after realising the true terms of the sale agreemen=t.
Buyers "thought they were under the impression they were purchasing their
house form the time they made the first (rental) payment", Ms Hurley said.
"They thought they were eligible for the First Home Owners Grant and wrot=e
to the Treasurer but he wrote back and said it wasn't mortgage-type
agreement."

Inset story:

Attorney General Trevor Griffin described Rent-to-Buy schemes to Parliame=nt:
• Purchase price in today's dollars but purchaser has no ownership righ=ts to
property until after settlement.
• Settlement delayed for 10-15 years.
• Purchaser moves in and rents house from vendor until settlement.
• If vendor has mortgaged the property and the mortgagee forecloses pri=or to
settlement, the sale to the purchaser is cancelled, the deposit and all p=ast
rental payments are lost and the right to remain in occupation is gone.
• The vendor can cancel contract at any time but the purchaser cannot a=nd
must buy their way out of the sale.
• Penalty provisions if settlement brought forward.
• No resale by purchaser prior to settlement.
• Rental payments are not instalments - rent does not come off the purc=hase
price.
• Purchasers not protected by Residential Tenancies Act even though the=y
have a rental agreement.
• Rental payments above true market price.



This is the entire article. It appeared in the "News Review Messenger" bu=t
I'm not sure of the edition or date.
Half of those issues brought up by Trevor Griffin are a load of crap. If
people ARE doing that then they are not doing it legally, and as a result
may end up causing a lot of problems for the rest of us in the near futur=e.

Boyler Room



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Reply: 1.1
From: Les .



With the right spin on it, EITHER case can make a lot of sense.

In fact, did anyone else notice how many of the Trevor Griffin statements decrying "Rent to Buy" actually apply to your common-or-garden Bank mortgage?

There are some tremendous people who DO provide a real opportunity for the buyers as well as for themselves..... And it sounds like there is a "second tier" group as well? Nothing new !!! It all comes down to "caveat emptor" doesn't it?

For the sake of those doing the right thing with these "rent to buy" deals, I hope the regulatory agencies don't throw the baby out along with the bath-water .... Don't forget, to do this would hurt those buyers that have no chance of home-ownership thru normal means.

I like Steve McKnight's tenet - it's the PEOPLE that make a deal, not bricks and mortar. Treat the PEOPLE in your deals well, and your future is assured. And, yes, there might be some "two-tier" BUYERS out there as well, so a seller shouldn't have blinkers on when they sign up a buyer - is there a Latin phrase to suit?? Maybe something like "Beware of buyer" rather than "Buyer, beware" ..... ;^)

Regards,



Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 1.2
From: Michael G


Hi,

That's why I think Rick Otton's Vendor Finance/Wraps association is a good idea.

Actually there are some very valid points in the article. The one about the vendor defaulting is very valid and does pose a risk. This is one issue I'm having my bank work with me to create a solution.

I.e. Tamper proof joint accounts or something.

Also I strongly believe the buyers have independantly legal representation. This is a must so they understand the difference between a wrap and a lease-option.

Only lease-options can be done in S.A. and its true they have no equity in the title during the lease. Because any rent credit would be considered an installment and illegal in S.A. under the state's act.

Michael G.
 
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Reply: 1.2.1
From: Rick Otton


firstly i wanna know how les and the others get those little coloured sign offs,cause i carn't get it to work

secondly yesterday i received this . ok its american so hence the lord reference.

Hello Mr. Otton,

My husband, Rick, and I were not able to purchase a home through traditional lending sources, due to some old credit problems. When we saw your "Owner Finance" sign in front of a lovely home in the neighborhood where we were leasing, we hoped that this would finally be our opportunity to own our own home. It would all depend on the owner's willingness to work with us. That owner was you, and because of your business, we now own our home. The transaction was smooth and trouble-free, and when we were ready to re-finance after the first year, the process could not have been easier. We are so thankful, as a couple, and as a family, for our home that the Lord provided through you. We would hope for your success in your endeavours and would not hesitate to let others know of our experience in purchasing a home from you.
Thank you again for everything,
Sincerely,
Heather Matzdorf

the point?...does Govt intervention help or hinder?

Rick Otton -President Vendor Finance (wraps)assn
 
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Sim

Administrator
Reply: 1.2.1.1
From: Sim' Hampel


I have a graphic file I created (.gif file) uploaded onto my personal web site, which I reference directly in my signature.

My signature says literally this:

<IMG SRC="http://sim.hampel.com.au/images/sim.gif" ALT="Sim'">

which gives this:

 
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Reply: 1.2.1.1.1
From: Les .



G'day Rick,

Some kind soul (Sorry, kind one, I couldn't find the article, but you know who you are) gave me the "good oil" on the signatures. I'll try to post it, but it might just appear as
Les


...and it DID !!! (I just KNEW it would ;^) I'll try changing the first character from < to a ( so you can see it

(FONT SIZE="4" COLOR="#0000FF">(B>(I>
Les
(/I>(/B>(/FONT>

OK - that does it - just change the ( characters to < and you should see

Rick


then play with the 0000FF bit until you get a colour you like - FF is Blue full on, I think FF0000 might be Red full on, etc.

Have a play, but note your FINAL colour is NOT the same one you see on Preview. e.g. my Blue name appears Red in preview.

Good luck,


Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 2
From: Rolf Latham


Watchdogs

Woof !

I keep saying that the biggest "sheme" around is the legal and licensed institutions where even under consumer credit code contracts, people are paying secured rates of up to 12 and 13 %, and unsecured rates exceeding 20 %.

One could almost argue that the authorities are playing a game that the ACCC would not like to much - one of stifling competition in lending, and by default allowing the big end of town "free" reign.

Ta

Rolf
 
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Reply: 1.2.1.1.1.1.1
From: Gee Cee Clay


How does this look???



GEE CEE.

Ah well .

Better stick to property!
 
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Reply: 2.1.1
From: Les .



.... Thunderous applause !!!!!


Well done, Rick



Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 2.1.1.1
From: Boyler Room


For those that are interested, I now have a copy of the hansard and what was actually said by Trevor Griffin. As per normal, the article doesn't quite accurately reflect what was said nor does it state that it is only in reference to long term settlements. If anyone would like a copy let me know.

Boyler Room
 
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