Rent to Buy Scam? Donegal

herbie_gump

HI All,

My significant other and myself have been looking to buy a house for about a year now, but saving for that elusive deposit has been taking longer than expected as its hard to rent AND save... A few weeks ago we saw our 'dream' home on the rent to buy website (www.fasre.org). So we looked into this scheme and WOW it all sounded just too easy.. so we approached the builder of the house independently and agreed a price with him on this r2b thing. The builder advised us we to go AIB and BOI and whoever else to make sure that after the 2 years rental is up that we would get the mortgage no problem and that our rent over the 2 years would be accepted as the downpayment or deposit for the house.

This is where the 'scam' title comes into play. After visiting AIB, BOI and even Ulster Bank they each told us that they do not recognise this scheme. They WILL NOT accept rent paid over 2 years (or whatever ur rental reiod is) as deposit for the house. Which pretty much defeats the whole purpose of the scheme. So we went then for a 'polite' chat with the estate agent at r2b, just happens that the contacts she talked with about this scheme are on holidays and wont be back for couple of weeks so we will have to wait until then to hear back to see what the heck is going on with this thing.

Another interesting note... while we were in AIB talking to mortgage advisor person she rang Cork city branch, Dublin Branch and Galway branches, and she even rang the head office of home mortgages while we sat there and they either have never heard of this scheme or did not recognise it. So im interested in finding out what about all the other people that have opted into this scheme? did they just not bother checking out if they will get the mortgage after the 2 years or are they happy to pay there rent AND also save for that darn deposit!

XDivaX

Hey Herbie,

I'm really grateful with you for bringing that up as like you, I was looking at fasre and talking about it with my man but wouldn't do anything until after this year as I'm in my last year at college.

There is another agent doing this with a certain estate in Ramelton- Franklins which might be more "genuine".
Well I hope so because I really want to move out and live with my man only I'm very "anti-rent" and would buy a house.

WaltKowalski

EBS offer mortgages under the rent to buy scheme.

skippy09

I have done the rent to buy scheme and have had no problems with the banks....

SkepticOne

It may not be a scam. It sounds to me like the bank did not understand the scheme. The operator of the scheme supplies the deposit out of a portion of the rent you have been paying. That is how it is supposed to work.

Of course not being a scam doesn't mean it is good value or that it is wise to buy at this time.

skippy09

It is good value for someone like me who is a single mother, working skin and bone to try and raise my daughter in a stable environment and when i don't have the resources to save for a deposit on my own, at least this way a percentage of the deposit is being taken out of my rent every month without me having to worry about saving for it!!!! Of course it doesn't suit everyone but for someone like me it is ideal. Each to their own i suppose....

firesidechat

There are various rent to own schemes available on the market today.
It's an excellent programme to help get your foot in the door with the property market.Do you'r research and find the best available rates also make sure that a solicitor is involved and you know all the fees that will be charged to you......Best of luck with the venture....go for it..

ztoical

It's hardly a scam when you can look into it all and find out from banks etc...I'd say it was a scam if they signed people up and only then told them there were catches.

SueWho

The builder/ scheme operator keeps the rent you pay them for two years and that money is what is given to the bank as the deposit, IF you decide to go ahead with buying.

My problem with these schemes would be that you have to have a lot of trust in the company you are paying rent to- what if they go bankrupt? What if they are just crooked? I'd certainly get a solicitor involved if I were signing up to one of these schemes.

I'm sure some of these schemes work perfectly fine but there are always crooks out there too.

Ste.phen

SueWho wrote: »

The builder/ scheme operator keeps the rent you pay them for two years and that money is what is given to the bank as the deposit, IF you decide to go ahead with buying.

My problem with these schemes would be that you have to have a lot of trust in the company you are paying rent to- what if they go bankrupt? What if they are just crooked? I'd certainly get a solicitor involved if I were signing up to one of these schemes.

I'm sure some of these schemes work perfectly fine but there are always crooks out there too.

I think if the company goes under you're in the following situation:
* you've paid rent and in return gotten somewhere to live
* someone buys the entire estate and presumably wants to sell them on to someone individually
* some variation on the original deal is probably going to occur
(Someone trying to offload them will consider someone a) already living there, and b) already decided to buy it some day, as a good possible purchaser I imagine?)

herbie_gump

Does any know which banks etc do accept this scheme for sure and will accept ur 2 years rent as the deposit? just trying to shop around, it seems the few iv looked into so far dont.

Thanks for the replys!

Victor

There are schemes out there, but they are run by the developers - there is nothing official. If you have concerns, speak to your solicitor before you part with your money.

roseym

From what I understand it is usual that with the rent to buy schemes you pay the "rent" to the developer who holds a proportion of the "rent" for you, and (depending on the contract you negotiate with the developer) sometimes takes a percentage of the "rent" as actual rent. This might be on a sliding scale i.e. if you buy within the first year you get 100% of your "rent" back, buy within the first two years you get 85% of your "rent" back, buy within the first three years you get 70% of your "rent" back, and if you decide not to buy then you don't get any of your "rent" back - but you won't really be at any loss, having had a roof over your head for three years. The banks aren't really involved in the mechanics of all that as far as I know. The developer is effectively holding the deposit for you.

Not that I am any expert on it, but just from googling it and speaking to some estate agents the above is what I have gathered. You should have to go through financial checks from the developer's side to make sure that the bank are eventually likely to give you a mortgage. If they don't do that then I'd be a bit worried about how professional they are.

One thing to keep in mind is that you would be a TENANT for the three or four or whatever amount of years it is until you buy the house. You couldn't go knocking walls or making any changes to the house I don't think.

At the end of the day the developer wants to sell the house. When you think about it it's of no benefit to them to try to scam you into this, they'd surely want to sell the house to you, not trick you into living there! Just remember you are negotiating the contract with them, you don't have to accept whatever the developer first offers you.

As long as you have a good solicitor working for you I'd have no concerns, it seems like a great - when you think about it you would essentially be buying a house at todays prices, except in three years time when prices will probably have recovered a bit. And in the unlikely event that house prices are even lower in three years time than they are now, then you can walk away and havent lost anything -your rent has paid for the roof over your head for the last three years.

SamuelFox

I know a guy working for a developer who offers a similar scheme, the problem for the tenant/buyer is that if the house price falls in the meantime you still have to buy at the higher price. From the developers point of view the house won't sell for two years anyway, and when it does it will be a two year old house, not a new one - you'd be surprised how relevant this can be. They effectively get two years rent off you which is the depreciation and they sell the house.

roseym

Having had a look through a few threads on about it on here it seems to vary hugely from developer to developer.

Re what SamuelFox said, one person on here got a clause in the contract to the effect that if the open market value of the property had fallen by the end of the rental period then they would accept the new valuation of an auctioneer. Not sure exactly how that would work though, who would appoint the auctioneer etc. So there defo seems to big variety in terms of how the schemes work.

Also came across someone elses post who said they had an option to sell their interest, i.e. say if I was renting with my fiance in the place and we split up after a year having saved up 12,000 of the deposit and neither of us now wanted to buy the house, then we could sell the 12,000 deposit saved to someone else and they would continue with the remainder of our tenancy.

If really depends on what you negotiate. I think if you approached a lot of smaller developers at this stage they would be interested in doing R2B even if they don't have it on their ads. Maybe people would have better bargaining power with them. The one thing I would be concerned about is the capacity in which the deposit would be held. Think I would prefer that it is held for me by a third party, like maybe the solicitor dealing with the transaction, than taking the risk that the developer may reinvest it into something. Although then by withholding the "rent" I might be putting the developer under unnecessary financial pressure and jeopardising the whole deal. It's hard to know really.

Another thing I would be concerned about is that a lot of them are only aiming to have the tenant save up for a 10% deposit, whn the reality of things at the moment is that very few people will qualify for 90% mortgages these days. I had a look on purplepig.ie (who seem to be very reputable and knowledgeable when you look at their list of who's who) and did some maths - they aim to have their "tenants" save up approx a 17.5% deposit when you include the payment of the option fee. Any part of the deposit saved which is surplus to requirements ends up in the tenants pocket. So I'd be concerned about any developer pushing someone to buy into a deal where the end result would be a total deposit of only 10% - it leaves no wiggle room if you have problems in getting a 90% mortgage.

garyvanc

hi folks,

i came across this post and id just like to say this is not a "scam". I am currently doing this scheme. Of course we had our reservations at the start and needed to be 100% certain it was legit, we were having trouble getting it sorted but that was our own fault. We were looking almost tooo much into it. Its actually very simple. You pay the rent to the developer for 2 years, you pay off whatever 8% of ur purchase price is, he will give u a credit note, u go to the bank and get ur mortgage, the bank doesnt care how u have paid ur deposit as long as the developer can confirm u did pay it (the credit note) WE have all this confirmed with AIB and BOI - they think its a brill idea.
U mite be thinking it sounds a little too easy, well to be honest it was... weve been on this scheme now for 6 months, in the house of our dreams in the countryside all without the hassle of saving for a deposit, but in a way we are saving our deposit by payin the rent.

If anybody is worried or anything PM me and i can go through it more with you, but i would recommend everyone to give this FASRE a go. especially this day in age when savings are reduced and saving for that elusive deposit is even harder!

Senna

i would agree that the OP thinks this is a scam for the wrong reasons. If you were buying a house normally, you will pay a deposit to the builder, even before you approach the bank, the receipt of this deposit paid is proof to the bank that you have the money and only need the balance (90% etc) for the mortgage.

The problem i always had with these schemes, is the valuation. If you have agreed a valuation for 1/2/3 years time it will be in no way realistic. And the builder would be foolish to renegotiate with you a realistic price, because if he though he could sell the house at this renegotiated price to someone else, why would he give you back the deposit? Why wouldn't he sell to someone else at that price and keep your deposit?
Too many unknowns, too many maybes.

oflahero

These schemes have one purpose - to provide developers that are in desperate straits some sort of cash flow now that the banks are breathing heavily down their necks.

From the developer's point of view, this may keep them treading water while they hope for one of two things; one, that you fix the buy price with the prospective buyer/renter at the start, and even if the market continues tanking, by the end of the rental period the tenants will be so attached to the gaff at that stage that they'll buy it anyway. Two, that the property market will "rebound" by the end of the rental period, and everyone will be happy. By "rebound", I mean return to insane bubble prices which, outside the febrile imagination of Donie Cassidy, is not going to happen.

Therefore, the ball is in the buyer/renter's court. If you can ensure an agreement is in place that suits you - that the gaff can be revalued to the agreement of both parties at the end of the tenancy - then go forth and be happy. You have the leverage to do this.

K-9

You'd need to get the market price inserted into the contract alright. When it comes to getting the mortgage in 2 or 3 years, the bank will get it valued and they will base the mortgage on that value, not a price agreed 2 or 3 years ago.

The other thing would be with rents going down, you could end up over paying for a year or two.

D3PO

Its not a scam per say but its heavily favouring the developer, so I can understand why the OP considers it a scam.

1. You pay fixed "rent" for a period of X years when rent is falling

2. House prices are falling so what you have agreed to pay now isnt likely to be what the hosue is worth when you go to purchase.

3. If by miracle house prices go up the developer is insulated as theirs a clause allowing this taken into consideration but at the same time there is no provision for the asking price to go down.

Add them all together and the chances are that the person doesnt buy because the hosue is overvalued so wham developer gets above market price rent for a few years

or you buy becasue you feel invested into the scheme and wham developer gets above market value for the house sale. Assuming you can get a mortgage from the bank which if the propery is overvalued you wont

Either way its WIN WIN for the developer and not for the purchaser. So although its not a scam per se it is a scheme that has no advantage to the purchaser / tennant

D3PO

garyvanc wrote: »

hi folks,

i came across this post and id just like to say this is not a "scam". I am currently doing this scheme. Of course we had our reservations at the start and needed to be 100% certain it was legit, we were having trouble getting it sorted but that was our own fault. We were looking almost tooo much into it. Its actually very simple. You pay the rent to the developer for 2 years, you pay off whatever 8% of ur purchase price is, he will give u a credit note, u go to the bank and get ur mortgage, the bank doesnt care how u have paid ur deposit as long as the developer can confirm u did pay it (the credit note) WE have all this confirmed with AIB and BOI - they think its a brill idea.
U mite be thinking it sounds a little too easy, well to be honest it was... weve been on this scheme now for 6 months, in the house of our dreams in the countryside all without the hassle of saving for a deposit, but in a way we are saving our deposit by payin the rent.

If anybody is worried or anything PM me and i can go through it more with you, but i would recommend everyone to give this FASRE a go. especially this day in age when savings are reduced and saving for that elusive deposit is even harder!

Gary I really dont think your in a position to say its a great scheme until you actually purchase. Come back when you actually try and draw down a mortgage and get refused due to the hosue being worth less than the mortgage and then tell me its a great scheme

the_syco

The way I see it:

The developer is selling the house for €350k
The bank says the house is worth €320k

So you do the rent-to-buy scheme for 3 years, to make up the difference. You get a €30k "credit note" and goto the bank with it.

The bank now says your house is worth €250k. The developer still says the house costs €350k

This may have worked during the boom year, when the prices were going up or staying level, but on the slippery slope down, it won't work so well.

"Scam" may be too strong a word. More like "unworkable" imo.

garyvanc wrote: »

in the house of our dreams in the countryside all without the hassle of saving for a deposit, but in a way we are saving our deposit by payin the rent.

Buying with your heart rather than with your head is not always a good idea.

garyvanc wrote: »

You pay the rent to the developer for 2 years, you pay off whatever 8% of ur purchase price is, he will give u a credit note, u go to the bank and get ur mortgage, the bank doesnt care how u have paid ur deposit as long as the developer can confirm u did pay it (the credit note) WE have all this confirmed with AIB and BOI - they think its a brill idea.

The bank won't care how you paid the 8% deposit, but you'll need to make up the difference between what the developer is selling the house for, and what the bank thinks it's worth.

gallagoose

herbie_gump wrote: »

HI All,

My significant other and myself have been looking to buy a house for about a year now, but saving for that elusive deposit has been taking longer than expected as its hard to rent AND save... A few weeks ago we saw our 'dream' home on the rent to buy website (www.fasre.org). So we looked into this scheme and WOW it all sounded just too easy.. so we approached the builder of the house independently and agreed a price with him on this r2b thing. The builder advised us we to go AIB and BOI and whoever else to make sure that after the 2 years rental is up that we would get the mortgage no problem and that our rent over the 2 years would be accepted as the downpayment or deposit for the house.

This is where the 'scam' title comes into play. After visiting AIB, BOI and even Ulster Bank they each told us that they do not recognise this scheme. They WILL NOT accept rent paid over 2 years (or whatever ur rental reiod is) as deposit for the house. Which pretty much defeats the whole purpose of the scheme. So we went then for a 'polite' chat with the estate agent at r2b, just happens that the contacts she talked with about this scheme are on holidays and wont be back for couple of weeks so we will have to wait until then to hear back to see what the heck is going on with this thing.

Another interesting note... while we were in AIB talking to mortgage advisor person she rang Cork city branch, Dublin Branch and Galway branches, and she even rang the head office of home mortgages while we sat there and they either have never heard of this scheme or did not recognise it. So im interested in finding out what about all the other people that have opted into this scheme? did they just not bother checking out if they will get the mortgage after the 2 years or are they happy to pay there rent AND also save for that darn deposit!

Don't know if things have improved here but I have just moved into a property on the rent to buy scheme and I am very happy. Went into Fasre in Letterkenny asking about the scheme and they showed me a few houses on R2B. They have their own financial advisor, I did have to go to the AIB about it as well as they’re the ones who are backing it.

It cost the guts of €3000 to get onto the scheme this includes your solicitor’s fee. I was able to pick out my own kitchen and tiles in the house which I think is great. So far so good there was no catches or anything and I can still walk away from the property if in the unfortunate event something happens that I can’t purchase the property. However I do stand to lose the initial fee and the rent I would pay up to that date but I would lose that on rent anyway. I would definitely give it the thumbs up!

Has anybody else gone on the rent to buy in Donegal or am I the first?

the_syco

Lots of new accounts, with their first posts all supporting fasre...

Also, you say you have entered it, but so far, there is no-one that has bought their house from the R2B scheme.

Keith C

gallagoose wrote: »

Don't know if things have improved here but I have just moved into a property on the rent to buy scheme and I am very happy. Went into Fasre in Letterkenny asking about the scheme and they showed me a few houses on R2B. They have their own financial advisor, I did have to go to the AIB about it as well as they’re the ones who are backing it.

It cost the guts of €3000 to get onto the scheme this includes your solicitor’s fee. I was able to pick out my own kitchen and tiles in the house which I think is great. So far so good there was no catches or anything and I can still walk away from the property if in the unfortunate event something happens that I can’t purchase the property. However I do stand to lose the initial fee and the rent I would pay up to that date but I would lose that on rent anyway. I would definitely give it the thumbs up!

Has anybody else gone on the rent to buy in Donegal or am I the first?

so are you going to provide a few figures?

Whats the future price for the house locked in at?
Whats the monthly rent?
Have you tracked the area on www.irishpropertywatch.com

Interesting info on blueskymortgages website

Main features of a Blue Sky Rent to Buy Contract:
Purchase price is market value now or market value at future purchase date-whichever is the lower. 5 Year option to purchase.
All rents and deposit deducted from the price.