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Here's my story and I'm trying to figure out what to do. Advice and Comments Appreciated. I'll try to keep as short as possible.
Found a "Lease to Own" property in November close to where my relatives live. My wife and I decided to move there and try it out. We are paying $850 month rent with $250 going towards escrow every month to use to purchase the house. Lease is every six months and self-renewing up to two years (every november and april) with a 60 day notice required if we decide to vacate.
Found out after living there for a few months that the house had a natural gas explosion. The house walls were damaged (brick house) and bowed out from the explosion. Inside damage too to some drywall and kitchen. All this has been replaced. The brick walls were jacked in and repointed, mortar, etc. Good camoflauge job. Couldn't tell by just inspecting the property.
We do not want to live here for long now. I will not buy a house that had all that structural damage that was supposedly fixed. It may or may not be fixed according to standards. I don't care to find out as there are many houses on the market now in better condition that didn't have major structural damage.
Landlord does not know we know about the problems this house had (two years ago). This was never disclosed to us when we signed the lease, which is just a standard lease. We are afraid to confront him yet as we don't want to be on the street somehow. All rent is paid in full on-time every month.
We found the perfect house we want and don't belive it will be around too long. We want to go FHA and the price is 134,900. We have about 5K for down payment and would try to get closing costs paid by seller.
What to do about the lease. What to do about the house. Wait it out until end of summer and aim for october closing? Confront landlord and try to make a move asap? We don't know what to do! Leave it to me to pick a winner!
I'm not trying to get out of a contract or obligation. I put some money into the house (cable ran, cosmetics, about 1K) before we knew. I feel like we were misled at best, scammed at worst.
Thanks!
Did you have an attorney review the lease before you signed?
I would contact a real estate attorney if not to talk through options.
Thanks for your reply ...
No attorney reviewed the lease. It was a standard lease (rent) agreement that I've read and signed many times. Just the standard things.
I was thinking of confronting him and see if we can go month-to-month with a 60 day notice. Either that, or wait and try to time it after summer and close in October. If we would have known any of this, we would have never moved from our old apartment.
If it's a standard lease how can you be sure $250 a month is going into escrow?
A lease to own agreement is anything but standard, imo. I also don't believe landlords need to disclose damage in a renting situation.
If it IS a standard lease, how will you (or the landlord) prove the lease to own?
Hi ladyofnight,
We have a standard lease agreement and a separate escrow agreement. The separata escrow agreement states that the $250 is going to escrow every month, to be given to us if we decide to purchase the house. If not, he gets to keep it. I also wrote in a clause that states if there are any deficiencies found with the house that we can't agree upon, I get the escrow monies back. All of us initialed and signed it. I don't even care if he keeps it if we can get out or go month-to-month. We would have never moved if we knew this.
Yes, you're right they don't have to disclose if it is for renting. But this is a "Rent to own" or "lease to own" option in which we would have found out eventually, unless he was going to try and conceal the fact from us through the purchase. Which would be illegal. I just can't stand people with no integrity.
Oh, i see. I don't think a lease to own situation requires disclosure either but that doesn't matter it seems if you get to choose to walk away without having to give a reason.
I can't imagine you'd close on a home in much less than 60 days anyway, so if that's all he requires for notice I'm not sure i understand your question unless you're wanting to keep the escrow money
He can't boot you out during a lease because you're home shopping but he can give you notice that he will not renew your lease in April.
It all really comes down to a judgment call and none of us actually know the man so it'd be pretty tough for us to give sound advice. What's the difference between mentioning this to him now or waiting until October?
ladyofnight,
I wanted to mention this now to see if we can agree on a month-to-month lease with a sixty day notice. I don't believe we're at fault here, and I just want something that is amicable to both parties. I want to mention this now because there is a house we saw that is really what we want and if given the chance want to go through pre-approval and maybe make an offer. I don't hink it will last til October.
Thanks
@Anonymous wrote:Hi ladyofnight,
We have a standard lease agreement and a separate escrow agreement. The separata escrow agreement states that the $250 is going to escrow every month, to be given to us if we decide to purchase the house. If not, he gets to keep it. I also wrote in a clause that states if there are any deficiencies found with the house that we can't agree upon, I get the escrow monies back. All of us initialed and signed it. I don't even care if he keeps it if we can get out or go month-to-month. We would have never moved if we knew this.
I would think that clause entitles you to a refund of the escrow funds. Questionable structure would be a deficiency, IMO.
I'd have it inspected (which is your right in purchasing a home) and see what a qualified building inspector says. Are there any chances the deformities you see could be cosmetic and not actually structural?
Yes, you're right they don't have to disclose if it is for renting. But this is a "Rent to own" or "lease to own" option in which we would have found out eventually, unless he was going to try and conceal the fact from us through the purchase. Which would be illegal. I just can't stand people with no integrity.
Lease to own, as I'm sure you know (so I'm spelling it out for those who might *not* know), is merely an agreement made between the renter and owner that if you choose, you get "first right" at purchasing the home. While under the agreement, the owner can't just sell it to Bob and Barb out from under you. For that "privilege" you pay the escrow amount each month, a portion of which is then applied against the down payment, should you ever choose to purchase the home.
If you decide *not* to purchase the home, the owner get to keep the funds since he couldn't sell it while under the agreement (sorta like damages - since he had to turn away possible potential buyers while you had the agreement). Unless you have contingencies (like the deficiencies clause).
In the end, the LtO is really just a delayed purchase. Like calling "dibsies." At the end of the lease, you have to go through the same steps a "regular" home-buyer does to buy the home. That includes FULL disclosure.
I'm not a real estate atty (of which I would go see one, posthaste), but I'm 99.9% that once you seek to enter an actual home-buying contract with the owner and you get the disclosures (and the inspection) that "new" contract supercedes the previous LtO contract. Add in a clause (though it's boiler-plate) that if the house doesn't pass an inspection to your satisfaction, the deal's off.
Meaning, you *should* end up free and clear -- and with your escrow back.