Buying a home can be daunting, especially for the financially unsophisticated or those with bad credit. Erlean Hall was both, and now she has a cautionary tale to share with others. Additional government regulation could help would-be homebuyers avoid the lease-to-own hassles Ms. Hall experienced, but consumer awareness is the best way to avoid getting in over one’s head.
As Post-Gazette staff writer Kate Giammarise reported Monday, Ms. Hall signed an agreement with Vision Property Management for a house in Dravosburg. With $1,370 down and monthly payments of $420, she expected to be able to own the $48,000 house — after making a final lump-sum payment — in seven years. Instead, even though the agreement said so, she was surprised to learn that only $33.63 of the monthly amount counted toward the purchase price. That pushed ownership much further out of reach.
The agreement with Vision also made her responsible for home repairs from the get-go, even though these are the landlord’s responsibility, not the tenant’s, in standard leases. After spending hundreds of dollars on plumbing problems, Ms. Hall struggled to keep her dream of homeownership from slipping away. Then, when she lost her job and fell behind on her payments, Vision filed papers to remove her from the house. She now faces the loss of her down payment, equity and home. Vision could bring in another prospective owner, starting the process all over again.
Vision says it wants its clients to succeed and works diligently to make sure they understand terms and conditions.
However, in a recent report, the National Consumer Law Center says the arrangements are “built to fail.” Its objections include the shifting of repair obligations to the would-be buyer and the ease — because there’s no foreclosure process — with which the occupant can be evicted.
The center recommended that the Consumer Financial Protection Bureau impose new regulations on the industry, such as requiring a standardized contract recorded in a government office. Other suggestions include mandating house inspections and appraisals before the parties sign and annual statements spelling out how much the buyer has paid and has left to pay.
These are excellent suggestions. However, government finance agencies and social service agencies also could help with education so that consumers avoid these predicaments. Lease-to-own is billed as an alternative path forward for those who want to buy houses but can’t qualify for conventional mortgages. That may be true, but buyer beware.
First Published: October 1, 2016, 4:00 a.m.
