Unfortunately, the Leaseback is one of the most popular of the foreclosure scams, because it fills the most common need of the homeowner in distress – the desire to stay in the home they have built.
The Leaseback is also referred to as “selling your home and renting it back” or just “a rent-back option”. The scam works like this:
You deed your home to an investor.
You sign a rental agreement.
The investor may offer you an option of buying the house back in the future (for a higher price than you sold it to them).
The investor takes over the payments – they may even bring your loan current.
The investor pockets the rent you pay.
The investor waits for you to make a mistake.
The slightest mistake, and you are evicted IMMEDIATELY. If you fail to pay your rent on time, or are one penny off the agreed-upon payment amount, you are evicted. If the lease says you cannot hang pictures on the wall, and you hang a photo of your beloved pet, Skippy, you are evicted. If the rental agreement says you need to hand-deliver the rental payment, but you decide to mail it, you are evicted. Any diversion from the lease, you are out on the street. You are legally obligated to leave.
A leaseback, while not always advantageous to the homeowner, is not illegal. There are some states (Maryland, Colorado, Illinois, and Minnesota to name four), however, who have strict regulations to how a leaseback must be structured and documented. Any violation of those regulations, and the vulture is caught!
We'll talk about those regulations in a later post. First, we'll continue reviewing the common foreclosure scams!
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