For anyone astute about real estate....could use some help

[BusynMember]

I will try to explain this quickly.

My son S. and his soon-to-be-ex J. had a house built for them on a rent-to-own basis. I know this is unusual, but the builder couldn't outright sell his homes so he allowed them to rent-to-own (in a three year spread) a house he built for them from scratch. Are you still with me?

Fast forward. They have lived there for a year and J. wants a divorce and is hot to move out of the house. She is almost packed and ready to go. If she moves out, S. can't afford to live there alone. How the hello should he get out of the lease/agreement without wrecking his credit? Is it possible? J. doesn't mind having bad credit so appealing to this doesn't work with her. He would like her to stay until the divorce is final, but she is already trotting around town, even taking my grandson out with her until 10 at night and she is loving the single life. She doesn't want to live with him anymore.

Any ideas? I don't know anyone who has been in this situation before so I just told him to talk to the builder. He is NOT paying a bank. For the first three years, the builder agreed to let them pay him.

Any feedback is appreciated. Thanks!

 

[DDD]

I know quite a bit about real estate but I don't have any experience with rent to own. Likely the paperwork that your son has indicates the "what if's" and he should review each paragraph. The only subsequent option is to talk with the builder. With the economy as it is there is a slight chance that he could maintain the home. Sorry I can't be of more help. Hugs. DDD

 

[keista]

He absolutely must talk to the builder. It all depends on how the agreement was written up. Is there an "escape clause"? It's also possible that even if he breaks or defaults on the agreement that the builder won't report it to the credit bureaus. If it's not reported, it doesn't affect credit. Builder may be able to file suit, and get a judgement, but that probably wouldn't be worth his time.

You never know, builder may be very happy to get out of agreement, maybe he can sell outright now, or for more money, or whatever.

 

[witzend]

Got to talk to the builder. He has no choice. If he's up front with the builder, the builder can at least put it on the market, which he will most certainly do in any case. Better to just list it than to have the builder wreck S' credit and list the house because he's ticked that S wasn't up front with him.

 

[Hound dog]

I agree, he's going to have to talk to the builder as he's the actual owner. Might be he'll understand and help your son find a way out of it......maybe getting it sold or up for rent from someone else so he no longer has to foot the payments.

Usually, now this is what I've heard from my sis who has sold several homes this way, it works similar to renting........but if the one leasing has to leave, house reverts back to the owner. She's had that happen a couple of times as well. Only once did someone just up and leave. The other one I know about explained the situation (they'd lost their job) and sis and her husband told them not to worry about it, just do what they needed to do and they'd find someone else, which they did........and that person stuck it out until they had it paid off.

 

[flutterby]

"Rent to own" is a legal term that can mean many things in different states. In Ohio, rent to own just means that a person rents the house with the option to buy it at a later date, but there are no legal rights transferred until the house is purchased (a land contract is what you want to do here if you want legal rights). He will need to look over the contract he signed. Also, most people and companies who rent don't report to the credit bureaus. If he ends up evicted through the court system that would show up, but if he works it out with the owner he should be fine.

 

[LittleDudesMom]

The laws are different state by state but usually renting to own means that, should the tenant want to purchase the home, they get credit towards the purchase price for what they have paid in rent. Sometimes there is a purchase option at the end of the term and sometimes it's wide open. Depends on how the agreement, or lease, was written.

Now, if both are listed on the lease then they are equally liable for the rental amount. No one can just walk away from a lease with liability, but again, the laws vary from state to state.

Most leases are written, even purchase options, for a particular length of time with a total rent due which is broken down into monthly installments. i.e., 500 per month for a two year lease = a total lease amount of 12,000. Should the tenant terminate illegally, moving out before the end of the lease term, they are liable for the full amount.

Your son needs to speak with the builder and let him know what is going on. His wife is still liable for the terms of the agreement regardless of whether she is living there or not if they are both listed on the lease as tenants (not just an occupant - which is why I always urge roommates to be tenants rather than one as the tenant and one as the occupant. An occupant has no liability. I can tell you, as a landlord, that receiving information from the tenant about what is going on is essential in working out difficult situations.

Sharon

 

[BusynMember]

Welll, thank you all (as usual you were great).

J. (wifey) doesn't care if he is evicted or has bad credit and she refuses to pay a dime. I'm not sure how that would work out in court, but son is trying hard to stay on good terms with her so that she doesn't hit him for more money.

I think Son is speaking to the builder today. Thanks again for all the responses You are GREAT!

 

[witzend]

Let us know how it goes. I have a feeling that the builder will work with him.