Charlotte Property Management Weekly: Why Don’t Big Real Estate Firms Embrace Rent-To-Own?

“My Broker-In-Charge highly recommends we stay away from rent-to-own transactions. They just aren’t safe.” (Traditional Realtor)

“You can fool some of the people, some of the time. But you can’t fool all the people, all the time.” (Bob Marley)


Big real estate firms used to make a lot of money. Big real estate firms still do make a lot of money. That is why I find it difficult to criticize, or offer any type of advice, to entities that have had so much success (especially those that have done so for a long time). The biggest firm in my market in Charlotte made $6 BILLION dollars a few years ago. That’s billion, with a “B.” That’s awesome! At least I’m impressed…


So, I thought about it. These people running these firms must be really smart (I’m not being facetious at all); they’ve made a lot of money for a long time. Why are they so anti-rent-to-own? Why are they scaring their agents with stories of disaster and endless risk? Smart people don’t make strategic business decisions on a whim. So why are they so overtly steering away their agents from rent-to-own (lease option) transactions?


This is what I came up with:


1. Lower margin deals- this is usually true.


2. They are not in the property management or credit repair business. This is not a core competency and once again, is a lower margin business.


3. Brokers have already been trained to do general brokerage. It’s hard enough to get people to do one thing well, why confuse things?


4. If they are not going to train for rent-to-own, these transactions can be risky. I mostly mean this on the rental side of the equation. If you don’t know how to screen tenants and have a property management mechanism in place, you can send your clients into financial ruin instead of saving the day.


5. It’s cleaner. If a client doesn’t get approved for a mortgage, they get shown the door. If they do get approved, then an agent can show them houses and write an offer. They get paid 30 days later. No fuss, no muss.


6. They believe we are in a temporary situation. The market will hit bottom and banks will start lending again soon.


7. The thing to do is cut expenses, which means not expanding the training budget to teach lease option. This is true of most of Corporate America; everybody cut their expenses to the bone. This is why corporate profits are up, while revenue (and employment) is flat or down- this is also known as “hunkering down.”


8. For profit reasons, they just have a focus on procuring listings, not necessarily filling them. Sales is a numbers game; get enough listings and some will be bought. Plus, having their signs in everybody’s yards for a long time is great branding (though it really shouldn’t be…). It’s also free advertising (free for the firm, that is. Not for the owners of vacant homes!)


So, the bottom line is that lease options are more hassle, for less money, to address what they view as a temporary situation.

Maybe this is smart business.


But maybe not…


Businesses that help clients (even when it is not convenient or profitable) tend to be the ones that stick around; so do their customers. Real estate professionals are supposed to use their acumen to create solutions for their clients that help them manage their “biggest investment of their lives.” This means increasing cash flow, stemming losses responsibly, and using techniques appropriate for the times. It doesn’t mean amassing listings because a firm knows a certain percentage of them will turn into short sales.


Protect profit margins or customers? Why not both?


Are we learning anything about what not to do from the bankers? Or will history repeat itself?


Let me know your thoughts.


Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. You can contact him directly at Brett@BDFRealty.com. For a FREE subscription to “Charlotte Property Management Weekly” via RSS, click here. Or by e-mail, click here.