by Damon Carr, For New Pittsburgh Courier
June Walker, a 65-year-old woman from Detroit, finished paying off a rent-to-own house in more than two years believing it would be her forever home. But she is now facing eviction after apparently being a victim of the “fake landlord” scam all along.
~ Black Enterprise
Here’s one of many reasons I’m not a fan of land contracts or lease with options to buy. This Detroit native living on a fixed income was duped by a fake landlord.
She paid for home improvements and paid off a land contract thinking she will be awarded a deed to her home, only to find out that the people she made the contract with, NEVER EVER owed the home. Now they’re missing in action and she’s about to be evicted.
Land contracts are dope. I love them, especially for people with bad or no credit. But you have to always check. The ownership of a property should be on your county auditor’s site. It’s rarely wrong.
You actually think that land contracts are dope (great) for people with bad credit and no credit? You might as well add broke people and people who are poor at managing money to your list. If the aforementioned was an answer to a Jeopardy question, the question would be who are people that are not ready for homeownership? Most people attempting to purchase a home by way of land contracts never end up taking ownership of the property.
The only land contract that has a slim chance of the deed actually transferring is when it’s between family members. Even most of those transactions end in bad blood and poor business dealing negating the hopefull owner from ever getting the deed to the house.
Damon, I guess it depends on the situation. If someone is sincerely trying to repair their credit or they’re fresh out of college with no real debt (no student loans), I think it’s a good way to begin the journey to homeownership. I told you, we differ on the credit issue. I’m all about life experiences and saving money while spending time doing the things you love. Saving for things for years and years at the expense of living your life is not what I’d recommend. When you save up for large purchases or retirement, you need to balance it with your mental wellness and not just sacrifice your able years saving up for something that may or may not ever happen. Tomorrow isn’t promised.
If you are between 30-45, you need to save for retirement but don’t push back things like car ownership and homeownership for too long. You’ll have a home at 55 and, trying to buy outright, the only memories of homeownership you have will all be in your old age.
Christina, I’m going to answer your recent comment point by point: You’re not going to repair your credit with a land contract. They don’t show up on a credit report.
It’s hard to get a mortgage with bad credit for obvious reasons—you don’t pay your bills on time! However, it’s possible to get a mortgage with no credit or a thin credit file. There’s a process called manual underwriting where they can build a credit profile with alternative sources of verifying payments. Plus, a person with no debt or credit established tends to have more money to put down.
I’m not sure where we differ on credit issues. I encourage people to pay their bills on time and pay the balance off as fast as humanly possible. Doing that will give you a great credit score. Personally, I’ve never had bad credit. My credit scores are excellent. I’m simply knowledgeable enough to know the primary benefit of a credit score is to get you more debt. I encourage people to focus on building their “wealth score” or net worth. Building your wealth score is what leads to financial freedom.
If it takes a person to old age to purchase a home, it’s either by choice or because they’re doing something wrong. Getting a firm handle on your finances only takes about 2-4 years. After you get a firm handle on your money, you’ll have increased wiggle room to live your life like it’s golden. That includes being able to save for a reasonable down payment to purchase a home among other things like shopping, traveling etc.
You mentioned balancing mental wellness. Money problems are the number one stressor. As a result, having little to no debt, a decent savings account and some wiggle room in your budget helps tremendously in mental wellness. You’re right, tomorrow isn’t promised but if you’re fortunate enough to live into old age, you better have some money saved because Social Security by itself will have you standing in soup lines.
Who said you had to push back buying a car or home in order to save for retirement? Not me! Apparently, you take exception with my idea of using credit only when absolutely necessary. This idea forces people to think before they ink — sign on the dotted line. It encourag ages people to make large purchases with some skin in the game ~ money as opposed to zero down100 percent financing. Here’s the facts: You’re either saving for a few years to make big purchases or paying on it for years if you didn’t save to purchase it. Pick your poison. Just know that having skin in the game costs you less in interest.
Land contracts are bad for a few reasons:
- The broke person with bad credit who couldn’t manage their money couldn’t honor payments on the land contract. They default. Contract null and void.
- During the land contract terms deeds stay in the owner’s name. It’s transferred only after the land contract is paid off. If the owner defaults on his/her mortgage, the house gets foreclosed on. The bank doesn’t care about the land contract deal you supposedly had with the owner who didn’t pay.
- Let the buyer beware! There’s a ton of fraud that goes on with land contracts similar to what’s featured in this article. The reason there’s generally no professional mediary that has the buyer’s best interest at heart. The buyer is a layman who tends to get duped in these transactions.
- Unrecorded land contracts generally are not accepted by lenders. If you seek to get financing prior to paying off the land contract the so-called equity build up with the land contract isn’t counted because there’s no recorded record and sloppy documentation to verify payments.
(Damon Carr, Money Coach can be reached at 422-216-1013 or visit his website at www.damonmoneycoach.com)