Colli Real Estate

Are those rent to own ads on craigslist legitimate?

I’ve been searching for rentals in the Bay Area Craigslist postings and have come across multiple listing for 2-3 bedroom homes for a very low monthly rental. The ad states “Rent to Own, take over payments program offering Pre-forclosures, Foreclosures, FSBO’s and Auctions” I don’t understand it and don’t want to be taken advantage of so can anyone shed some light on the legitimacy of these listings?

It looks like they’re trying to pull a fast one one someone. I’m not sure exactly what the game is. Maybe it’s to get someone in a rent to own situation, which greatly benefits a seller and is very risky for a buyer/renter.

The first red flag is the take over payments claim. You can’t take over payments on someone’s mortgage in order to buy their house. You have to get a new mortgage in your name that pays off the seller’s mortgage. Title then transfers to you and you are the new owner. The only thing that you might possibly be doing is buying the property with seller financing (they hold the first mortgage). But, they might be trying to get you into a situation where you’re paying the seller’s mortgage for them and they never lose actual ownership of the property (some kind of scam).

Rent to own is where you rent a place from the owner for significantly more than it should rent for each month and the excess is applied toward a down payment. You usually have a certain time period where you must either buy the property or lose a lot of that accumulated money. Rent to own is good for a buyer who doesn’t have the cash for a down payment and/or he must delay buying, because he has to repair his credit before qualifying for a loan. The buyer can also lock in the price of the property in advance. But, there is the risk of losing that extra money if the deal falls through.

Rent to own is good for a seller, because they get to charge more for the rental. And, historically speaking, most rent to own arrangements don’t end up with the renter buying the property. And, the agreement is usually one where the majority of the money that would have been applied to the purchase does not get refunded to the renter (the owner keeps it).

The renter must also continuously rent the property during what can be a pretty long term (a few years) for the purchase option to be available. If the renter has to move for some reason, the owner again pockets most, if not all, of the down payment money.

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