'Rent-buyback' scams proliferate as owners try to save their homes
A growing number of financially strapped homeowners are falling for so-called "rent-buyback" scams in a last-ditch effort to stave off foreclosure.
Q. We are in bad financial shape and have received a default notice from our lender because we haven't been able to make our mortgage payments for the past two months. We recently received a letter from a private investor who says that if we sign the title to our home over to him, he will sign a contract to let us "rent back" our home for an amount that's nearly half of the mortgage payment that we are supposed to be making to the bank and will allow us to buy our house back within two years. This seems like a good deal, because it will cut our housing expenses in half now and then let us use those savings to repurchase our home later. What do you say?A. Be wary of such proposals. Some are legitimate, but many others are not."Rent-buyback" schemes are proliferating, the Federal Trade Commission recently warned, because so many homeowners are behind on their payments and are willing to do anything to save their home from foreclosure. In a typical scam, the con artist offers to take title to the property and simultaneously provide an official-looking rental agreement or lease-option contract that purports to give the owner the right to repurchase the house after they regain their financial footing.In reality, though, the con man then starts collecting the rent but never makes any payments to the lender - or else couches the agreement in complicated legalese with terms so burdensome that repurchasing the house becomes impossible. Either way, the original owner winds up losing the home and any equity that was in it.To avoid such scams, the FTC says you should refuse to do business with any investor or firm that guarantees to stop the foreclosure process regardless of your financial circumstances, as well as those who discourage you from contacting your lender, a lawyer or a government-approved housing counselor. Also avoid companies that charge upfront fees before rendering any services, those that insist that future payments be made only by a cashier's check or wire transfer or those that demand that you let them fill out any necessary paperwork for you.I hope your financial situation turns around soon. But before you sign a rent-back or lease-option deal, call your current lender and ask if there is anything it can do to help. Such aid can range from a temporary reduction of your monthly payments to an outright refinancing that will slash your housing expenditures permanently. Also call a mortgage counselor who is approved by the U.S. Department of Housing and Urban Development. The agency trains their counselors to stay abreast of new laws that can help owners save their homes, and there is little or no charge for their services.You can find a HUD-approved mortgage expert by visiting the agency's website (www.hud.gov) or by calling the department at (800) 569-4287. Another good source of help is Hope Now, a free credit- and foreclosure-counseling service operated by a consortium of lenders, nonprofits and others involved in the housing industry. You can find a counselor near you by visiting the group's website (www.hopenow.com) or by calling it at (888) 995-4673.Q. Is termite damage covered under a typical homeowners insurance policy?A. No, a standard homeowners policy does not provide coverage for damage caused by termites or most other types of pest infestations.Q. I inherited a relatively large portion of raw land from my mother. The parcel is in another state and I want to sell it. I have always paid a 5 percent or 6 percent commission when I sold my previous homes, but the agents I have contacted about selling the raw land want a 10 percent or even 15 percent commission! What's going on here? Are they trying to rip me off because I'm out-of-state?A. No, the agents aren't trying to rip you off. Raw land is typically much harder to sell - and usually takes much longer to market - than single-family homes because there simply aren't as many prospective buyers for undeveloped lots. Charging a double-digit commission to sell the land will compensate the agent for the additional marketing efforts and allow the agent to earn about as much as he or she would by charging 6 percent for a property with a house on it. Your letter states that the parcel is "relatively large," which means your pool of possible buyers may be especially small because the lot's big size might mean it will appeal only to professional developers.bull; For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.#169; 2010, Cowles Syndicate Inc.