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Lease Purchase - Horror Story

Homeowner, it was a simple lease purchase! That went terribly, terribly wrong.

Here is a true story of a lease purchase gone bad. This was a prospective buyer that had contacted me. This is in Montana.

Yesterday, I went to a buyer's home to talk about the Equity Holding Trust Transfer method and why I use it, etc. They called wanting a home, but there credit was in the dumps. It turned out; they needed an ear to listen to.

Two years ago, they entered into a Lease Purchase with a seller for 60 months. They gave him the fee to move and proceeded to move in. While moving in, a person they had never met, stop by and asked why they were moving into his house. A bit dumbfounded, the buyer explained and showed him the Lease Purchase agreement. This person was the original owner to the property. He was outraged that the "middle man" had leased it to another person and he was not informed of this, but decided to let it ride for now.

Fast forward to last September, the buyers have upgraded the home, almost finished the basement. They have never missed a payment in 18 months. They get a noticed from the "middle man" to vacate. In trying to find out why, they find the Lease Purchase agreement the "middle man" and the original owner was being terminated. The original owner worked out a verbal agreement with the buyer to stay on, but only to pay his mortgage and taxes. That dropped there monthly payments form $1,400 to $900 per month.

In December, the original owner sends an eviction notice to the buyer. Stating the buyer has no claim to the house and should vacate. The buyer stopped making payment in December.

Well, in January, the "middle man" takes the original owner and the buyer to court for breach of contract. At the same time the original owner rescinds the eviction notice. That was eventually thrown out, since the original owner had title. Now the "middle man" is suing for loss of money and stuff. The buyer is either looking at a large attorney bill or vacate and hope to find something else. That is why they called me.

I had not got past the first page, when both of them teared up and wished I had been around two years ago. They saw the light.

It was a shame; the Lease Purchase was for $140K. They were buying down the loan with their monthly payments and the loan was at $125K. That was the amount needed to buyout. They offered the Original owner that amount, but in attempting to get the loan they found the "middle man" had clouded the title. I don't remember how that happened. The new loan was canceled. The buyer's friend then offered the original owner $135K for the property and the owner turned it down cold. The current value of the home is $200K.

That is the gist of a very long conversation with these very nice people. The bottom line is; they didn't do enough due diligence and needed the protection of the Equity Holding Trust Transfer .

I have heard stories of lease option's and lease purchase's going bad, but this is the first time I have been that close. They were definitely stressed.

In the Equity Holding Trust Transfer method, the owner is well aware that I will not be living in the home, but another party found by a real estate agent or me. The party that will be the resident cannot move in until the Equity Holding Trust Transfer is completely set up or the owner agree to an interim lease agreement. The interim lease agreement will allow the resident to move in, but the upfront cash needed must be in escrow and all trust and related documents are signed.

The Equity Holding corporation, a non-profit bonded corporation, has a collection company that handles all payments. No one can change that. If the resident fails to pay by the first of the month, all other beneficiaries are notified.

None of the above issues can ever happen when the Equity Holding Trust Transfer method is used.