Selling a Home via Rent Credit

Under the Rent Credit program, how do you close the deal when someone is ready to buy?  What is the final cost of the sale reported on the title?  Are you giving it away?  Selling it for $1?  Actual value?  Anything else to note to stay safe under the safe act?Mark

The SAFE Act is not that complicated. It restricts the ability to create mortgages, so the only options you have (unless you become SAFE Act licensed) are to rent or sell for cash. If you sell the home, it must be for cash and at fair market value. Any other construction will be considered a “disguised mortgage” and you have fallen back under the SAFE Act again. So if the customer want to buy a home that’s fair market value is $11,000, then $11,000 is the price and that’s what would be reported as the price. If they have rent credits of $10,000 and want to pay in another $1,000 in cash, then that’s fine. But you can’t give the home away, or sell if for $1. That defeats the whole purpose. You can rent or you can sell for cash - that’s all there is on the menu. Otherwise, you need to get your SAFE Act license.

I’ve seen articles that say “rent to own” is a “disguised mortgage” and punishable under the safe act. Rent Credits are very similar and Rent Credits certainly are NOT CASH. So I’m still a bit confused. I understand the frequent flyer’s concept, so I guess what you’re saying is that frequent flyer miles are same as cash as Rent Credits are same as cash.So if a tenant has $11,000 of Rent Credits toward a home worth $11,000, then I do essentially give it to them but report it as a cash sale of $11,000?Mark

Rent to own violates the SAFE Act because it typically involves the buyer paying $1 at the end of a certain number of months of payment, as well as paying all repairs – which looks identical to a mortgage, right? A Rent/Credit system is a straight rental. The owner pays for all repairs, and the tenant is simply renting the home. As a benefit to the renter, and to increase their retention, they receive credits which they can or cannot use, at their option. Rent to own and Rent/Credit have absolutely nothing in common, based on how most park owners use Rent to own. But, at the end of the day, it’s your decision on how you want to structure it. I would contact my state MHA and become an expert on the SAFE Act before you decide on any course of action. I believe that SUN communities ( the second biggest REIT) pioneered the concept of rent/credit, as shown in the final paragraph of this narrative from their corporate website:Rent A Home - Sun Communities credits are the same as cash, and you are not “giving them the home” in any scenario. Yes, you would report the sale as being at the fair market value, regardless of whether it’s cash, rent credits, or a combination of the two. It’s simply a sale for cash, period. Although Southwest Airlines does not have a a dollar a point, you can buy tickets using points or dollars, and the two compute the same.

I’m not seeing the value of the Rent Credit program when the buyer is putting down a deposit that is not specified on the RC contract and deposits would have to be returned if they decided to opt out. In addition, if the MHP owner is covering all expenses over $100, then MHP are still stuck with a major expense. Seems like the whole RC program is a bandaid to get around Rent to Own and much simpler just to get the dealers license.