The Truth About Lease Purchases

I recently read on a blog a scenario about a lease purchase from someone who wanted to do a lease purchase instead of saving and waiting because they didn't have enough money for closing expenses, they didn't want to go through the expense and hassle of moving into a rental, saving money and repairing their credit, and then buying.  Their question was answered by an idiot who signed "Retired Realtor" and his answer was for this person to go ahead and do a lease purchase because agents only want a commission.  Ice cream has no bones.   I'd love to see how many successful lease purchases this agent did and oh, yeah - if he actually did one, HE GOT A COMMISSION!  I feel sorry for Retired Realtor because I know his bad karma caught up to him.  

Listen now and hear me later:  in a lease purchase situation you don't own it until the deed is in your name - when the final payment is made to the owner, whether with a mortgage loan in six months or cash at the end of the contract term.  Paying a monthly lease to an owner doesn't show positively on your credit score if that's what you're trying to repair.  You certainly don't own anything and you cannot take out an equity line of credit on a home you don't own, you don't get the tax deduction, and any expenditures you make in upgrades will simply become the owner's property.   People with borderline credit issues or those in limbo till that big commission or raise comes through shouldn't be so anxious to get into something they can't get out of later.  In our instant gratification society, you have to exercise patience, not get so emotional over a purchase of anything never mind your biggest purchase ever and get down to getting your credit score up so you'll have some financial muscle and can negotiate a great deal on a home in what may be a few short months.  Don't be the proverbial kid walking down the hall with the "Kick Me" sign on your back.  Unlike "Retired Realtor" who would suggest that get you into a lease purchase where he got paid up front, I'd rather you wait and get a good deal for you and your family.

I understand all too well that folks with not so good credit are just so anxious to be in a house they will agree to almost anything.  Many times, I've helped people be patient and work through those credit issues, sometimes for years or through several loan resources, and to not be as emotional about what is essentially a huge business decision for your personal finances.  Here's another cliché - no pain, no gain.

Another thought for those of you considering a lease purchase.  What happens with that contract 12-18 months down the road and you find out that the price you agreed to is now too high.  Your loan company's appraiser comes in and the home does not appraise.  Sometimes the price is renegotiated, but many times it's not Miller Time, it's Lawyer Time!