I have been working in real estate for over 5 years. I consider myself a creative realtor and investor. I have put together some interesting deals. The important thing is that the deal benefits everyone at the end of the day. Our Attorney General, Martha Coakley, has made a stance to stop creativity in real estate. The plans that she has set in motion are hurting much more people than she thinks she is helping.
One of the goals was to stop is Sale Lease Back scams. The intent was to stop unscrupulous people from buying a house from a distressed seller at a low price then leasing it back to them with the option to purchase in the future at a higher price. This practice did need to be stopped. 95% of the time the homeowner will not be able to obtain a manageable mortgage to buy their house back. Then the new owner can evict them and sell it for a profit. They were take advantage of.
The way the act was written by the AG it reads that ALL lease options are prohibited. Now some of the title companies will not underwrite a lease option deal. This actually hurts the consumer. Lease options have been around for centuries. It allows the owner the assurance that they have a sale instead of waiting for a sale. It allows a buyer to get in the door and build credit with the understanding that one day they will own the property. This is a win/win.
An example. I have a seller that sold a single family on a lease option. I have the buyer who was happy to get the property. They have been making monthly payments with a portion of the payments going toward the purchase price. The time has come to complete the deal. The buyer is ready, willing and able to buy. The seller wants to complete the deal and get the rest of her money. The only problem is that we cannot find an attorney that can close this deal.
One attorney wrote, "Unfortunately, I can't assist you with this particular transaction. Because of the new regulations and potential liability issues the title insurance company we use will not underwrite a deal of this nature. Different title insurers have different guidelines. You may be able to find another title company that can underwrite this type of transaction. It will depend on the title insurance company they issue through. I'd love to help you, but my hands are tied on this one."
I agree with restricting the sale of a property and leasing it back to the owner with the option to buy it back at a later time for a higher price. This should be stopped. But write the laws correctly so you don't hurt a much larger pool of buyers and sellers.
Martha, the banks are losing unimaginable amounts of money. The banks will correct the industry because they have to. They can't afford to not fix it. You cannot do more than they will do and you don't know the position you are putting people in who really do need help.
You are hurting honest people.
Thank you for reading. Please forward to Martha Coakley. :)
Dominic Kirchner II
WPI - Avion Realty