Thoughts on buyer quality (long) - Posted by Nate(DC)
Posted by Nate(DC) on July 08, 2001 at 17:03:07:
I’ve been thinking about similar things lately and so I’ll try to answer your question as well as share some of my musings on the subject.
The first thing I’m confused about is, why are you advertising “rent to own” and then taking these people to a lender? Are you trying to “rent to own” (in which case you don’t need a lender) or are you trying to sell (in which case there are better ways to word the ad). When I do lease/option or rent to own, I advertise it as such, and then run their credit myself to see if they have a shot of being able to get financed within a year or so. If the only reason you’re calling a lender is to run their credit, you can do this yourself and save a step.
Secondly - If you are advertising rent to own, you probably WILL get people with horrible credit who need a lot of handholding. If they had good credit, or could do the process themself, they would go to a lender, get a loan, and buy a house! In my experience, when dealing with this caliber of buyer, you need to be prepared to do all the hand holding necessary to get the deal done. Don’t count on the buyer to do any of it themself.
As far as buyers with no cash - you CAN screen for that in the ad - “Need $3000 down” or whatever. That is pretty straightforward.
Now this brings me to my last point which is what I’ve been pondering lately. I have a great mortgage broker who is able to get people qualified either for 100% financing or for subprime FHA (97% LTV) even with what I would consider bad credit histories. In fact, she has been able to get people qualified, who I would not consider as L/O candidates, for mortgages. Given that, I am seriously wondering why I should even consider doing a L/O anymore. After all, if my own standards are stricter than the mortgage company’s standards, anyone who would meet my standards could get a mortgage and cash me out immediately with no risk and no waiting to get paid later.
Anyway, hope that gave you some food for thought…