Rent to buy!!

zen15

Looking at add in sunday Times Property section for Bakersyard, rent to buy scheme, went on website , glossy but no details ,
Anybody any views, opionins or advice on this , as I would love to move back to Dublin from Drogheda

Tails142

Ask them what happens in say, two years time, when you've payed in 24 months rent and worked up a nice deposit of say 24,000 euro, and the company X_Property_Developer LTD. goes into liquidation - will you have lost everything?

Also ask them what happens if the property you move into now is valued at 350,000 - but say again after two years of paying rent, its valued at 300,000. Do you have to pay the developer 350,000 minus the rent you've payed in, or will the rent you've payed be offset against the future market value when/if you decide to buy.

My gut instinct is to avoid but if the answers to the above two questions are favourable, i.e. you wont lose your money if the developer goes bust and that the rent you pay is offset against the FUTURE value when you decide to pay then its worth a punt.

Senna

The Rent to Buy schemes are nothing but a scam. You agree a price now for something you might buy in 2/3 years time, its a falling market and i would not be surprised if the market was still dropping in 2011/2012, drops might be smaller per year, but still dropping.

With this scheme you pay more rent than the market average and all the money you pay does not go to the deposit, only a percentage.
The rent market is dropping also, so in 1-2 years time you could be paying considerable more rent than a similar property next door and you will not have an option to negotiate the amount down.
Then in 2/3 years time you will be given the option of buying the house at 2009 level, which will be higher than the house for sale next door.

So 2/3 years time, you've paid more money than you would have if you just rented and if you dont buy the house you still have no savings.

Best advice is rent now, save a deposit and buy when the time is right not when some scam is up. If you were trying to buy these house now you could get a seizable discount off the price, with this you dont get any discount. Also banks valuations are coming in lower for house bought maybe only a couple of months ago, do you think you will get a mortgage in 2011 for a 2009 price, i dont think so. The developers in this scheme dont really care if you buy the house by then, you have already paid a seizable amount of their loan and got them trough the worst of the recession. What happens if the developer goes bust between now and then?
The developers who have come up with this scam must be laughing at people gullible enough to take it up.

cormie

Are there any genuine schemes like this where you buy the house at market value today and can haggle it down, then you just pay the developer a monthy fee legally agreed and if you don't keep paying, they reposess the house. No banks involved with loans etc, just an agreement. Would be a good way for developers to start selling their empty houses and great for renters too.

Senna

cormie wrote: »

Are there any genuine schemes like this where you buy the house at market value today and can haggle it down, then you just pay the developer a monthy fee legally agreed and if you don't keep paying, they reposess the house. No banks involved with loans etc, just an agreement. Would be a good way for developers to start selling their empty houses and great for renters too.

So you mean rent?:D

I understand what you mean but you basically mean the developer becomes the bank. Instead of paying the bank the mortgage every month, you pay the developer every month. A developer hasn't the legislation that a bank relies on to operate.
A huge part of a mortgage is the deeds of the property, in your example, who has the deeds? Is a developer going to give them away, with only having an agreement that you pay every month? what would happen if you paid for 24 years but missed a payment then, you haven't held up your end of the deal so the agreement is broke and the house goes back to the developer. What happens if the developer goes bust, if you dont have they deeds then it becomes a asset of the developer to be liquidated.
I'd say there are even better reason why this wont work but its late and you get the idea.

cormie

Yeah, I know nothing about the subject really, but as a renter, I really hate just throwing money away on something that will never be mine. Perhaps some deed agreement could be done and supported by the Government to encourage properties to get sold and to increase confidence in buying. Just an idea anyway that would be cool if it was possible

mrgaa1

Senna wrote: »

The Rent to Buy schemes are nothing but a scam. You agree a price now for something you might buy in 2/3 years time, its a falling market and i would not be surprised if the market was still dropping in 2011/2012, drops might be smaller per year, but still dropping.

With this scheme you pay more rent than the market average and all the money you pay does not go to the deposit, only a percentage.
The rent market is dropping also, so in 1-2 years time you could be paying considerable more rent than a similar property next door and you will not have an option to negotiate the amount down.
Then in 2/3 years time you will be given the option of buying the house at 2009 level, which will be higher than the house for sale next door.

So 2/3 years time, you've paid more money than you would have if you just rented and if you dont buy the house you still have no savings.

Best advice is rent now, save a deposit and buy when the time is right not when some scam is up. If you were trying to buy these house now you could get a seizable discount off the price, with this you dont get any discount. Also banks valuations are coming in lower for house bought maybe only a couple of months ago, do you think you will get a mortgage in 2011 for a 2009 price, i dont think so. The developers in this scheme dont really care if you buy the house by then, you have already paid a seizable amount of their loan and got them trough the worst of the recession. What happens if the developer goes bust between now and then?
The developers who have come up with this scam must be laughing at people gullible enough to take it up.

I know of a scheme where the buyer pays a small amount upfront - something like 1-2% of the agreed purchase price, the person then rents for 18 months and ALL the monies is used as a deposit. If the buyer does not want to buy then they've lived in a rented building. If they do buy then the monies is used as the deposit for the mortgage.

So to say that the scheme is a SCAM is somewhat wrong. At the end of the day the solicitors should ensure there is nothing wrong with it and more importantly I suppose the buyer has the stronger hand and may be able to haggle for more.

Fizman

Senna wrote: »

The Rent to Buy schemes are nothing but a scam. You agree a price now for something you might buy in 2/3 years time, its a falling market and i would not be surprised if the market was still dropping in 2011/2012, drops might be smaller per year, but still dropping.

With this scheme you pay more rent than the market average and all the money you pay does not go to the deposit, only a percentage.

Ray Darcy actually rang this crowd up this morning, and was speaking to one of their guys for about 5 mins. The guy basically said that ALL rent paid will be put as deposit against the house. Although I think the period in question was 12 months. I.e I agree a fixed price of 280,000 for a house tomorrow. I move in and proceed to pay rent for 12 months at 1,200 a month. After the 12 month period, if I decide to purchase, then the 14400 I paid throughout the year is discounted off the initially agreed price of 280,000 (regardless of the value of the house in 12 months time).

Pro's and cons really. Its and interesting one though.

Senna

mrgaa1 wrote: »

I know of a scheme where the buyer pays a small amount upfront - something like 1-2% of the agreed purchase price, the person then rents for 18 months and ALL the monies is used as a deposit. If the buyer does not want to buy then they've lived in a rented building. If they do buy then the monies is used as the deposit for the mortgage.

So to say that the scheme is a SCAM is somewhat wrong. At the end of the day the solicitors should ensure there is nothing wrong with it and more importantly I suppose the buyer has the stronger hand and may be able to haggle for more.

I assume there are a number of schemes of this nature, the one i know most about is the one i'm talking about in my post, there has been a number of articles, radio and TV discussions about it, its that largest one operating at the moment, all the details in my post are correct regarding this scheme.
The one you are taking about is different, but has the same flaws; is 1200 a month competitive seen rents are dropping?
Also you still agree a price now but wont be paying it for 1 1/2 years. In the Irish housing market thats a very long time and i'd foresee a lot of people in this scheme not getting mortgages in 18 months time.

Negotiate a good rent now and save your money, then in 18 months you have options, not just 1 option and a bad one at that. Plus if renting you can continue to rent in the same house for more than 18 months, what happens if you dont buy the house? you have to move out?

p.s. I still stand by my scam description, and dont expect your solicitor to be able to negotiate better terms for your agreement. The terms are there for all to be seen, if you agree to them and a price. Do you expect the solicitor to advise you not to go a head? S/he may put forward some of the argument i've made but the decision is yours not the solicitors.