Is “Lease to Own” A Scam?

Is “Lease to Own” A Scam?

We took the Aerial Tramway up the last time we were in Palm Springs.  While up there, we met a cute young couple who live in Southern California.  We joked, took pictures, and shared appetizers before we raced out to catch the next tram down.  Of course I gave them my card.  The girlfriend decided to give me a buzz today because she noticed that the back of my card indicated that I help people buy foreclosures and short sales in my area, Santa Maria CA and Orcutt CA.  She wanted to run a lease option scenario by me.  Unfortunately, she didn’t have the name of the company on her.  But some company approached her about a rent to own arrangement where she would give them $160 and they would give her access to a database of homeowners who instead of getting a foreclosure would quit claim their house to you and you would just start making payments directly to their bank.  Hmmmmm.

Well I told her that it sounded like a scam.  Not a major league scam on the part of the people getting $160 for the “database” but there probably was a major league scam somewhere behind it.  I explained that quit claim deeds and foreclosures aren’t typically a part of a lease option deal.  Also, my opinion was that a lease option doesn’t solve the problem that is causing most of the foreclosures that I see – severe lack of equity and bad loans do — so I didn’t see lease to own as a real solution for many homeowners who were in distress.  And finally, I told her that any time anyone is quit claiming this or that over to anybody, and that new “owner” doesn’t have a real interest in the property, it raises a red flag for me.  Doesn’t mean it is fraud per se, but it does raise a red flag and I would have a reason to do a lot more investigation.

Of course, I asked her if her credit was poor because lease option offers are magnets for people with bad credit.  Indeed, she had a bankruptcy less than a year ago, but just found out that she is pregnant, so of course they wanted to get into a house.  I would hate to see a scammer take advantage of this wonderful couple’s desire to establish roots for their new family.  They will, one day, be great first time buyers and I want to protect that future for them.  There are legitimate lease option offers out there, but I do not think that this is one of them.  A basic lease option deal is a lot less exciting than the scenario these folks described.  She did the smart thing though – she ran it by a Realtor® and attorney that she trusted and it kept her from getting burned.

Copyright ©2011 Tni LeBlanc * Is “Lease to Own” A Scam?*


  1. Rent to own, is great for both sellers, buyers and investors if done properly. Making sure everything is up front so there is no surpises down the road. Rent to own companies are dealing with clients that are ususally stressed to the max so understanding the situation is paramount. If done properly, RTO can be the right vehicle to home ownership. We just make sure that our clients have proper legal representation..That in itself makes a big difference and tends to relieve our clients of the fear of being taken for a ride.

  2. John crum says:

    I an thinking of doing a rent to own with a company that charges 109 dollars to give you a list of homes in your area. They have investors to buy the home and rent it to you until you can buy it. What should I worry over if I do this deal?

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