The Investigators: Don't Do It! - Action News 5 - Memphis, Tennessee

The Investigators: Don't Do It!

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MEMPHIS, TN -

QUICK NOTES FROM ANDY'S REAL ESTATE & LEGAL SOURCES ON LEASE-PURCHASE AGREEMENTS:

* Insolvent builders or home-sellers often use them to unload homes on the verge of foreclosure.

* They're rarely, if ever, filed with a regulatory agency because there's no title, no mortgage, NO OVERSIGHT.

* Consumers pay too much up front. In a lease-purchase agreement, that money is not a down payment. It is a NON-REFUNDABLE DEPOSIT.

* The better option is a long-term RENTAL agreement with either no money down or a small security deposit, then an OPTION to buy at the end of the agreement.

 


MEMPHIS (WMC TV) - Never sign a lease-purchase agreement on a home. Ever.

 

At least not in this economy, according to Action News 5's legal and real estate sources.

Andrew Kee, broker/property manager and owner of Kee Property Management in Midtown Memphis, said before the housing bubble burst, consumers could trust most lease-purchase agreements. 

In better economic times, Kee said consumers could negotiate an amount up-front, settle on a comfortable monthly lease payment for an acceptable length of time, then the seller would responsibly put the up-front cash in escrow to protect both parties until the lease expired, allowing the escrow to be applied toward a down payment.

Not anymore, said Sapna Raj, managing attorney of the Memphis Fair Housing Center of Memphis Area Legal Services (www.malsi.org, (901) 432-4663).

Raj said now, prospective home-buyers are trying to buy too much house by putting too much money down on a lease-purchase agreement to move in right away. She said those consumers often confuse the money for a down payment or earnest money.

That money, in a lease-purchase agreement, is actually a non-refundable deposit, she said.

"We don't recommend that people enter into lease-purchase agreements precisely because of that," Raj said.

"It's better now to do a long-term rental agreement with an option to buy the house from the owner then it is to put down a lump sum and possibly never get the money back," said Kee.

Viviana and Alex Cifuentes of Bartlett, TN, negotiated a lease-purchase agreement with John Porter of Precision Equity Homes in Collierville, TN.

The Cifuentes agreed to pay $8,000 down on the home Porter's company built at 8759 Stony Glen Drive in Bartlett's Brunswick Village, a development of Precision Equity Homes.

Agreeing to reasonable monthly lease terms as well as a furniture purchase from Porter, the Cifuentes moved into the home in January to start the lease, which officially began Feb. 1, according to the agreement.

March 10, the Cifuentes received the first foreclosure notice from the bank that Porter and Precision Equity Homes had defaulted on the mortgage.

"Definitely, his intention was to be able to get this money, and then the house was going to go into foreclosure," said Viviana.

"We were played and totally used by Precision Equity Homes," added Alex.

Court records revealed Precision Equity Homes defaulted on three of its homes, all in the Brunswick Village development, since last summer. At least three banks - First Citizens National Bank, First Capital Bank and Community Bank, North Mississippi - have sued Porter and Precision Equity Homes for breach of contract. Porter denied the allegations in responses to the suits filed by his attorneys.

Porter declined the Action News 5 Investigators' request for an on-camera interview. In a written statement, he said the Cifuentes defaulted first on the lease-purchase agreement when their March 1 rent check was returned for insufficient funds.

Porter's statement didn't acknowledge the bank's first foreclosure notice, which arrived nine days later.

Porter's statement goes on to say he believes despite the foreclosure, the Cifuentes would be protected under the federal Protecting Tenants at Foreclosure Act of 2009. It allows tenants to remain in properties that fall into foreclosure for the remaining term of the leases, as long as they signed the lease agreements before the first notices of foreclosure.

"I also believe that it is in the best interest of both (the bank) and the Cifuentes that they be allowed to stay in the residence," Porter said in his statement. "If (the bank) would honor the lease, the residence would not deteriorate as most foreclosures do, and there is a good possibility that the Cifuentes would be in a position to purchase the property later."

After Action News 5's inquiry into the case, Porter paid the Cifuentes an undisclosed cash settlement. The family will attempt to use that money to negotiate a new agreement with the property's current owner, Regions Bank. 

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