New home lease/purchase....

[Big Muddy]

I posted this on another site, and didn't receive a definite answer.....I'm not familiar with home lease/purchases, so you guys might have some insight.....


I've got a young family-member couple who is in a 6 month lease-to-purchase home contract with a builder/contractor.

They have already signed all the paperwork, purchased renter's insurance, and moved in, last week.

Now, the builder/contractor wants THEM to purchase homeowner's insurance because his builder's risk insurance will only cover the home, during construction.

WTF????....why or how should THEY be responsible for the homeowner's insurance, and don't even own the home, yet???

[jb]

If they are leasing to purchase then it's considered there's. If they are just leasing they should buy renters insurance.
Builder is correct, his insurance just covers the house till it's occupied.

[Thumper]

That COULD be a can of worms Edward. All of that "should" be spelled out in the contract. That said ... as far as I know, the owner is responsible for all the property taxes, insurance, HOA fees, etc. I'm not even sure a "renter" can purchase homeowner's insurance on a home they don't own ... the mortgage holder would have to do that and all that should be absorbed by the rent. The renter can buy "renter's insurance" ... but that simply covers the contents (their personal property).

Who knows what the contract reads? All that should have been spelled out before signing.

Sounds like a Real Estate Attorney needs to scrutinize that contract. Not a slam here ... but it sounds like a cluster-fuck and none of the parties knew what they were doing on this deal.

[Thumper]

True Bubba ... but on a "lease-to-own" ... they are simply renters. Most LTO contracts don't guarantee purchase ... IF they DO decided to purchase, a portion of rent paid goes toward the sale price ... if they decided NOT to buy, they forfeit anything paid and it simply becomes "rent" paid. The builder is now no longer in the construction business, he's now a landlord/homeowner who's "renting" his house out. How do you buy homeowner's insurance on a home you don't own? That expense should be covered in the rent. A Real Estate Attorney needs to straighten this mess out.

[Thumper]

The more I've thought about this ... the stupider it sounds. The builder owns the house. If he owns it out-right ... fine, it's still his until it is SOLD. He'd be a total dumbass to leave the insurance up to the "renters". What if they quit making insurance payments and the house burns to the ground? If he has it mortgaged, the bank will require the house to be insured. Who pays the property taxes? Same deal. If I owned a home I was renting, I sure as hell wouldn't leave that up to the "renter". If they decided not to pay the taxes, the OWNER will be slapped with the tax lien, not the renters. What's the difference between insurance and taxes when you take into account the overall picture? That builder sounds like a total dip-shit to me. He may be simply pushing for more "rent" because he realized he fucked up AFTER the deal was struck.

[jb]

Depends on how the sales contract is worded. If they are lease/buying
it's like they are buying on a land contract. Just like buying from a bank except the contractor is carrying the note.

[Thumper]

I suppose it's all in the contract somewhere ... or SHOULD be. I guess there could be a difference in wording. Most of those deals are "lease with OPTION to buy". The way I figure it ... IMHO it's either a "lease" ... a "lease/option" ... or a "purchase". Why would a lease or even a lease/option be considered a hard sale? OTOH, why would a sale be considered a lease? Does the builder own the house outright (is HE the lien holder)? If not, it's financed under HIS name. HE would be responsible to the lender to carry insurance. Lease/options are shaky deals to begin with ... for reasons like the above for example.