Do you want the house back?

Rent to own ? No.

This aint no furniture store.

Legal land contract with my terms ?

You are right - why should you take more risk than a bank is willing to?

I "sort of" did it once, many years ago, with a house I was selling. The buyer was approved for the loan, except part of his income was from overtime - so the bank wanted to see that it was consistent for something like 6 months.

In Texas, RTO has historically been used to be predatory on people with a dream, but not a lot of money or sophistication. Because of that, if you do RTO incorrectly, you can lose more than the value of the house itself in penalties.

Do you know the point when a tenant gets an ownership interest in the house, and you move from having to evict a nonpaying tenant to having to foreclose on a nonpaying partial owner?

If you know it, and are comfortable with it, you can do RTO. But if you don't know it--- keep on saying no.

I am, willing to offer someone RTO. But they have to have over a 620 credit score and rent off of me for at least one year with no late payments.

I have done it in the past. Only had one tenant follow thru. Took them 13 years to do it, but they did.

I usually have set mine up with the option to pay towards the purchase of the house. Rent is $XXX, anything extra not including late fees or damages goes toward the purchase of the house. I didn't make them pay anything beyond damages deposit either.

The good thing for me was that they were responsible for the maintenance and upkeep of the place.

Lot of people talk about it but few start it up. For me even fewer follow thru.

" If the bank is not willing to take that risk why should i "

Excellent question, and I'll tell you the 100% always correct answer.

MONEY. TONS OF MONEY. You can get considerably richer off RTOs than straight rentals.

People who do RTO routinely do the following:

1) Inflate the sale price considerably above comparable market pricing.

2) Push some, most, or all of the maintenance on the tenant/buyer, limiting their own expenses. Some will fix "big items" like the roof and HVAC that the typical renter can't/won't fix.

3) Collect a lump sum up front large enough to cover all expenses of terminating the deal when it goes bad.

4) Limit the RTO to 2 years, after which point the buyer must cash out the seller with a standard loan from a bank or pay to renew their RTO contract (another big lump sum of $), or they have to move out and they lose all the money paid up to that point.

5) Rinse and repeat the process over and over. Some sellers will "Sell" the same house 8-9 times. Easier than actually selling the house and having to go find another one to redo the process.

So, in summary, you make a ton of money by collecting large sums up front, transferring the cost of most of your expenses, and if the buyer actually manages to close you get an above market purchase price. But usually that doesn't happen.

I say "when it goes bad" for a reason: RTOs rarely work out for the Buyer. As you said, their credit and finances aren't sufficient for a bank to trust them, and there's a reason for that. They are typically disorganized and never clean up their credit enough to get traditional financing. These are the same folks who shop at "Buy here, pay here" dealers. I have spoken to several RTO sellers, and per THEIR stats, fewer than 5% of buyers end up owning the home.

Now there are other ways to do it, and it can be done, but you asked why people do RTOs with people who are financially unstable, and I'm just telling you what several RTO sellers have told me. I am not making this up. This is literally how it works. Profits are huge for the "sellers". Buyers usually get left with nothing.

Legal? In many places, yes. Ethical? That's for you to decide.

I have thought a lot about it, one of the rules for OH is when 20 percent of purchase price is exchnged the purchaser is then an owner and a foreclosure must be pushed thru the court system, this takes 16-24 months with time added for clarification of steps along the way. I am patient waiting for fish to bite but not so much for payments to arrive.

I have only witnessed the Poubelle Blanche class ask for "rent to own." They will take liberties with the property (especially a SFH), have a bunch of flea ridden animals, let it fall down around their ears and never complete all the payments.

We did one property that way -- only it was a lease with option to purchase. Took a sizeable option payment ($3,000-5,000), which was non-refundable if they did not follow through. Gave them a 2 or 3 year lease (anything more than 3 years give them an equity stake in the property, as I understand it). By doing it this way, we could evict!

We did it twice -- first one paid us $5,000 as the option and walked away after 5 months to go live with her new boyfriend.

Second one was a $3,000 option -- stayed a year or two, got behind on the rent, and finally moved out on their own volition. We went for a damage hearing for the back rent and the gal asked the judge if she got her $3,000 back. Judge looked at her and said "what part of non-refundable do you not understand"?