f 95% of these deals actually failed, no one would engage in them.
I would estimate that in the last 10-12 years I am personally aware of somewhere between 7 and 10 such deals in my local area. Not a single one of them lasted past the 5 year mark. Two I can recall.
1) renter/buyer was employed at Northrop Grumman with a really good paying job for about 2 years prior to entering into the "rent to own" agreement. When the government contract on modifications to the E-2 Hawkeye aircraft was completed, the buyer was laid off for an indefinite period of time. They pretty quickly got a job at Carlise (a wire manufacturing company located here) that paid about half of what they were making at NG. So instead of getting behind on payments immediately, they lasted another 3 months with on time payments, and then things started to slip. Another three months later and the renter/buyer did 2 things.
- They stopped making payments entirely.
- They showed up at the landlord/sellers home with a quit-claim deed in hand, and the keys to the house. They arrived in their SUV pulling a U-Haul that was already loaded with all their stuff, as they were headed out of state to their parent's house since they could not afford to live here anymore.
Seller had to go through the foreclosure procedures (albeit, easier since he already had a quit-claim on the property) in order to just place the property on the market for sale. In the end after the property was actually sold, while they ended up with a taxable profit on paper from the sale, they actually owed the original mortgage holder a few thousand dollars which was paid from savings, and not from the gain on the sale since there was no "cash out" at all on the final sale.
2) Renter/buyer (married couple) lived in the house for 6 months or so, making all payments on time. Then due to a car accident one of them was killed resulting in a loss of income since they both worked to pay the bills. Now you would think the life insurance policy payout to the surviving spouse would have taken care of things. Well, it would have if the surviving spouse was the named beneficiary on the policy. She was not. The deceased husband's ex-spouse was still named as beneficiary on the policy, so they got the insurance payout. Since the ex-spouse had no legal obligation to pay, the landlord/seller could do nothing. Landlord/seller ended up foreclosing on the property and evicting the now single mother who had 2 young children.
Those are the two most recent ones I can recall the details of, because I'm the one that attempted to help them deal with it on their taxes. Ended up referring both to a professional they had to pay, because the TTX program was just not capable of handing their specific situations.
