The video above discusses how to protect yourself as a rent-to-own tenant OR owner (landlord/investor) and avoid rent-to-own scams, mistakes and problems –
- use good paperwork, have it reviewed, and signed by all parties before exchanging money
- use a lawyer, realtor and mortgage agent
- have a credit repair and mortgage preparation plan in place before jumping in
- why the Ottawa 2013 situation was not an RTO problem as such, but was actually a Ponzi Scheme where the first level of victims were actually the investors, and some tenants were victimized as a result
Rent-to-Own programs can help tenants (renters) on their way to home ownership. It can postpone the need to satisfy tighter mortgage lending requirements, and eliminate the immediate need for a large down payment.
While the overwhelming majority of rent to own offers are trustworthy, some are not. By the end of this free report you will know what to look for, how to avoid problems and how to ensure that your rent to own experience is a successful solution for your family.
Get everything in writing. Your home is probably your most important asset, and it’s OK to ask anyone you are working with to put a description of all services and promises in writing. Make sure you fully understand every document before you sign it.
Keep all of your records. And have a lawyer look over everything BEFORE you sign it. If you don’t retain a lawyer, at the very least talk everything through with a realtor who knows RTO first.
You can easily verify the credentials of the realtor and mortgage broker you are dealing with (both should be involved in your deal!) through their professional associations online.
In most cases the realtor will be showing you houses to choose from, AS WELL AS discussing with you the various offers made by investors who have shown an interest in working with you.
The mortgage broker on your side will be following your progress in repairing any credit problems so that you can qualify for a mortgage at the end of your lease – or even sooner, if you can qualify early.
Alimony, pensions, provincial disabilities programs, unemployment insurance etc. cannot be used as part of “total pre-tax combined household income” to qualify for a rent to own through RTO Partners. The simple reason is that these payments generally do not count when qualifying for a mortgage, and getting a mortgage at the end of your lease is what successful rent-to-own is all about. If someone tells you that disability or government payments qualify you to lease-to-purchase one of their properties, be sure to carefully understand their explanation and ask for an objective second opinion.
Legitimate RTO is not a “come one, come all” proposition. Unfortunately, some families will not qualify right away and will have to wait a while. It is our job to discuss all home ownership strategies available, their time frames, and the pros and cons of each strategy. Income is the one major factor that makes ALL home ownership strategies unrealistic for many would-be home owners, until they have a co-applicant or a pay increase.
Differences Between The U.S.A. And Canada
It seems that a variety of strange scams operate in the U.S.A. related not just to renting to own, but to real estate in general. It happens on a much larger and more organized scale than it does in Canada.
Combine a horrible U.S.A. economy, a glut of abandoned homes and people in need of cheap housing and you’ve got the basis for con artists dishonestly posing as landlords. Typically (more so in the U.S.A.), a con artist finds a property, pretends to be the owner, lists it online, then takes a cash deposit from a person who believes they are legitimately renting.
The renter is left with nothing or ends up squatting on someone else’s vacant property while paying “rent” to a criminal, all unbeknownst to the property’s real owner (which would be a bank in the case of a foreclosed home, but may also be an owner who lives far away and believes their property is vacant).
If you are shown the home and it looks as if the locks on the doors have been tampered with or the home looks as if it has been abandoned, it may be a foreclosure and not a home that someone currently owns free and clear.
The solution for this is very simple: work with an actual real estate agent who is experienced in rent to own. The possibility of being lied to about who owns the home then drops to zero.
In fact in our programs, the house isn’t actually owned until you are qualified and an investor is willing to buy the house on your behalf.
RTO Partners will only offer you publicly and privately listed homes that you have seen first. Move-in ready, legitimate listings, family-safe neighbourhoods, no exceptions.
The incidence of RTO fraud in Canada is a fraction of the percentage it is compared to the U.S.A. We’ve seen very few rent-to-own buyers who have been scammed in Ontario (although there are certainly others), and it was by an individual, not a company. The owner simply refused to acknowledge their purchase option contract and sold the house early. The proper paperwork would have prevented these situations. Every legitimate rent to own deal should involve a realtor and a mortgage broker who can tell you how to qualify for your mortgage.
(We also know of another dangerous real estate scam that has nothing to do with rent-to-own … title theft. This one does indeed happen in Canada (we know a victim in Manitoba), generally to current homeowners who are late on their mortgage and fall prey to a company that claims they will take over your payments if you put the title in their name. Instead they take the title and the home, without having paid you for it.)
There are, according to some web sites, rent to own scams where the renter does not see the home in advance, or may even be asked to wire money before meeting anyone. In some cases, to raise the absurdity level even further, the scammer is in a different country and sometimes overseas. We’re not sure how many competent adults would actually fall for anything like this, but it allegedly happens (at least according to newspapers).
The Landlord’s Obligations
Should the tenant (you) make rent payments, but the investor (your landlord) does not make their mortgage payments, a home could end up in default or foreclosure before the tenant reaches the purchase point, resulting in chaos for the tenant.
This is why we prefer to deal with rent to own companies, rather than individual investors who arrange rent to own deals privately, without involving experts, the most crucial being both a realtor and a mortgage broker. RTO companies have access to a pool of investors who are told about your desire to rent to own a home, and are also shown your qualifying credentials. It is then up to the investors to decide whether or not to accept your offer. The paperwork involved protects tenants from landlords who do not maintain proper up to date financing of the home.
What about repairs?
If the water heater breaks, for instance — who pays for it? This will be outlined in detail in your lease agreement, and the specifics will rely upon the partners we are working with in your city.
Can you make changes or improvements?
Unlike a rental, where you would probably not want to put any significant investment into improving the home, you may want to improve your rent to own home before you actually take ownership. You’ll need approval from the owner first, but they generally have no reason to say no.
What about property taxes?
You do not pay property tax before your lease ends.
What if there is a lien against the house?
Since, in our program, an investor buys the house AFTER agreeing to work with you as a tenant, there will be no liens against the property on your move-in day. Any problems would be revealed by a title search during what’s known as the “conditional period” where everything is firmed up, and if necessary the investor and you would choose an alternative home.
What if problems like mold show up on an inspection?
A home inspection will be required before you move in. Either you (the tenant) will pay for this service, or the investor (your new landlord) pays. The inspection SHOULD happen during the conditional period, during which everything is finalized (including down payment, inspection, investor financing, and all legal stuff) usually 1-4 weeks before your move-in day.
You must read all paperwork very carefully before signing. A legitimate rent-to-own provider will not have any problem with an attorney or other professional reviewing your paperwork. Get the future purchase price in writing. Do NOT sign a contract with an undetermined future purchase price, unless you know exactly how the future price will be determined and you agree to the calculation. The fact is, most rent-to-own paperwork and contracts in Ontario and across Canada are pretty standard at this point in time.
Patience is important. Do not allow anyone to pressure you into signing a paper or handing over money. Scammers often attempt to create urgency, but the reality is that there are always plenty of homes available that can be turned into rent-to-owns at any time. The only relevant schedule or “urgency” will be your own.
A mortgage agent should assist you in forecasting your future home ownership costs before you rent-to-own. You must be satisfied that you will be able to afford the home, and that you will be able to achieve the necessary credit score and other requirements that will allow you to take ownership.
Rent-to-Own can be your short-cut to successful home ownership. It can postpone the need to satisfy mortgage criteria, and let you put down roots and enjoy the home NOW while also giving you time to build up your down payment.
We hope that this free report has ensured that your rent to own experience is a positive and successful one.
If you have any further questions about this report or about renting to own a home (or getting a mortgage) in Canada, please contact us.