Phil! You misunderstood my meaning. - Posted by Todd (MO)
Posted by Todd (MO) on March 27, 2001 at 13:06:20:
I did not say that it was unethical to rent the home back to the owners, I have done this myself. I said that it is unethical to do so with the intent of throwing them out the minute they violate the agreement. There are investors out there who don’t want the homeowner to get their home back, they just tell them what they want to hear to get possession, then look for the opportunity to get them out.
It certainly could get messy. The ones I’ve done so far involved me putting a new loan on the house to pay off the defaulted mortgage of the seller. These were all deals with big chunks of equity, not skinny subject to deals.
These sellers knew they had quite a bit of equity in the houses, but were going to lose this equity. Non the less when one feels they have some equity, they want to somehow be somewhat compensated for going along with your deal. So in order to have them cooperate in the sale I had to give them the lease back. That lease back was their hot button.
Of the three, the 1st party stayed with me for 22 months and couldn’t afford the rent any longer, and the rent wasn’t very much, so they got a section 8 voucher and moved. The other two are doing fine and paying rent each month.
In determining on who will likely change their ways and pay, it’s a gut feeling. I look for accountability and sincerity. If I feel they have both I’ll do a lease back with them. Your first choice would be to not do the lease back, cut bait and wish them well.
To play devil’s advocate, I don’t see anything unethical for evicting someone for cause.
If you said to them “I’ll let you rent the place, and even if you don’t pay the rent, you can stick around anyway”, and then evicted them…YES, that would be unethical. But an offer to rent something to someone implicitly contains the information that a certain amount of rent is due, and that the rental will be terminated if rent is not paid. The fact that the person used to own the house has no bearing on that. Maybe they (the sellers/renters) THINK it does - but the fact that they’re wrong doesn’t make it unethical to me.