Indy BBB just rejected our entire industry!!! - Posted by js-Indianapolis
Posted by js-Indianapolis on October 13, 2003 at 16:37:43:
I?ll just let the conversation brew here first, before I go spouting off about my feelings on this. This was in the Indianapolis BBB?s ?FOCUS ON BETTER BUSINESS? flyer this month.
We “Buy” (?) Homes
We’ve seen the signs everywhere. “We Buy Homes” or “We Buy Houses.”
Have you ever wondered what those were about? Well the Bureau did, so
we did some investigating. After some checking, it’s the Bureau’s
opinion that many of these companies do not “buy” homes.
Most people expect when a buyer “buys” their home, they will receive the
money to pay off their mortgage at the time the buyer takes possession.
We found that many of the “We Buy Homes” companies (in fact all of the
ones that willingly provided the information we requested) do not do
this. Instead, the mortgage stays in the seller’s name, and the buyer
takes over the mortgage payments. What does this mean? It means that
the seller still has an outstanding mortgage in his/her name, and, if
the buyer is late making payments or the house goes into foreclosure,
it’s the seller’s name and credit that is dragged through the mud.
Once papers are signed to sell the home, the seller signs the title over
to a real-estate management company (another name the buyer does
business as). The buyer then rents the home out, usually to people with
poor credit. This is supposed to give the renters the opportunity to
build up their credit so that within a few years they qualify for a
mortgage. The renters would then buy the home from the “We Buy Homes”
company, which would then turn around and give the original seller the
rest of the money owed on the home. Everyone wins, right? Well, it’s a
little more complicated than that. Since the mortgage is still in the
original seller’s name, and the managing company’s rights are all
derived from a power of attorney rather than ownership, questions are
raised as to the original seller’s liability in the case that the
renters trash the home or worse, if the tenants are injured on the
property. Confusing? You bet!
There are other types of these companies that buy homes for cash to
rehabilitate, and these are usually a clear cut sale. However, the
primary market seems to be the one mentioned in the description above.
So, what has the BBB done with this information? For the first time in
the Central Indiana Better Business Bureau’s history, we revoked an
entire industry. We did it on the basis of misleading advertising
because it is our opinion that these companies are not “buying” homes as
their signs say. Just another example of the BB working to not only
education consumers, but protect the reputation of our members.