Dangers of a Rent-to-Buy Florida Home Loan
Foreclosures continue to rise across the state and nation. As more and more buyers are looking into riskier Florida home loans, the results can be financially dangerous. Take the case of Richard and Melissa McGlade.
The News-Press recently highlighted this couple and its four children. Thinking they were on the verge of happy home ownership, the McGaldes instead find themselves entangled in a legal dispute over a rent-to-buy Florida home loan contract for the Cape Coral home they’ve lived in for two years.
Trouble with such Florida home loans
Experts say the McGlades and their four children are among many who have run into trouble with rent-to-buy ownership, a common real estate purchase method around the country, also known as lease option financing. This supposed solution is generally used by people with poor credit or low income who can’t qualify for immediate property ownership or fixed rate Florida home loans.
Rising home prices in Southwest Florida have only added to the family’s problems. The median price of an existing single-family home was $280,500 in April - up 52 percent from the April 2004 figure, according to the Florida Association of Realtors.
April Charney of Jacksonville Legal Aid is an expert in landlord tenant and foreclosure issues. She said what happened to the McGlades is a “variation on the theme” for rent-to-buy arrangements. These Florida home loans rarely end well for those agreeing on them.
“What happens is people don’t get to the point of being able to say, ‘I’ve paid everything, give me my deed.’ The first time they miss a payment, they’re slammed with that eviction notice. The ‘renter’ loses absolutely everything the first time they miss a payment,” she noted.
The future of the rent-to-buy Florida home loan
Charney said there could be an increase in rent-to-buy problems if increasing Florida home loan rates and soft real estate prices force more people into foreclosure. The answer, she said, is first for people to avoid rent-to-buy completely. She says it’s “way too risky.”
The McGlades would agree right now. They agreed to let Housetraders Realty buy their house and put them in another Cape Coral house that they could buy for $165,000 after paying rent for two years. Then, Melissa said, they faithfully paid their rent for two years until the agreed-upon date of April 1, 2006. With the help of their Florida home loan broker, Linda Ireland, they prepared to close the deal.
But the deadline came and went - and Housetraders refused to close on the Florida home mortgage loan. McGlade said the company offered to sell but for $120,000 more than the original price.
“We need community-based debt management centers so people who are low-income or in dire straits can go and access specialized debt default management. We need to have places where people can get access to credit rehabilitation.”
Attorney general spokeswoman JoAnn Carrin said people should look before they leap. “The main thing is they need to read the contract very carefully before they sign it. They might even want to have someone experienced in real estate read it for them and just be aware of what they’re signing and what the conditions of the lease to buy the property are.”
In other words: Understand the Florida home loan process entirely before agreeing on anything. Be careful of all fine print. In a shifting market, it’s especially important to avoid dangerous deals. Too many buyers are currently stuck with nontraditional Florida mortgages.
Melissa McGlade said the dispute with Housetraders has thrown a crimp into the family’s efforts to get back on solid financial ground.
She works full time at Iguana Mia restaurant in Cape Coral and her husband is a transmission technician at Dixie Buick in Fort Myers.
But times are still tough, Melissa McGlade said. Their son Nicholas, 5, is doing well now but has needed heart surgery since infancy and will require more in the future. That means more trips to All Children’s Hospital in St. Petersburg.
“It’s not right,” she said. “We’ve been excellent tenants. Whenever there have been repairs that needed to be made, we’ve done it. They know my son has heart problems. How can you do this to a family?”
