Pfhorrest wrote:For short-term use my system collapses to something basically indistinguishable from what we have already. You start paying for the unit in small rent-like payments that, if you continued them, would eventually end up with you owning the unit outright, but you don't necessarily have to continue them. Worst case scenario, you could just walk away, forfeit the money you've already spent like you would forfeit rental payments, and let the unit be repossessed like a rental unit would. But you could also resell the unit and maybe reclaim some of what you've paid on it, and if it's something like a hotel, they might be happy to buy it back from you, since that's their whole business model. For less than they sold it to you, naturally, though the possibility of you reselling it to someone else places competitive limits on the difference they can charge.
This is even more confusing. So if you can just "walk away" from property you've been paying monthly for as if it was a rental, that implies that the owner is the person you "bought" it from...but then how can you "resell the unit"? Or are you proposing that if you "own" a house and then "sell" it on the stream of monthly payments, you're in some kind of quantum ownership state where the waveform doesn't collapse until the person you "sold" it to makes the final payment?
Help me understand this: Let's look at how this works under the current system. I own a house that I've partially paid off, but I now have a wife and kid, so I need a bigger house. My options are basically: 1) sell the house or 2) rent it out.
If I go with option 1, the buyer will negotiate with their lender for an interest rate, down payment, and prinicpal, then negotiate with me for a purchase price. After all the agreements are made they drop a check on me, we sign the closure documents, and I have a big wad of money and I wash my hands completely of the property.
With option 2, I establish a monthly rent, by figuring out what my known and likely liabilities are. I know I owe property tax, the mortgage payment, insurance, that eventually I'll need to do a repainting and repairs on move-out, and can probably figure the likely repairs that will be required over time (both ones I could do and ones I'd have to hire a contractor for), though many of those will require large lump sums (like replacing a water heater or fixing the AC). If I have half a brain, I'll also figure out what the opportunity cost of renting rather than selling is, and add that in (hey, I could just get a lump sum check and invest the money in the stock market rather than bother with being a landlord). Finally, I need to figure out what kind of risks I'll have in terms of getting a bad tenant, and the times between tenants that the house will sit empty. Then I can figure out a rent that's likely to make enough profit to make this worthwhile, because otherwise you're putting in a lot of work for $2.50 an hour. Then I find a renter, mostly try to satisfy myself that they will actually pay me on time, and let them move in. I get a stream of monthly payments, have the fixed monthly costs to pay, and have large lump-sum costs every so often when something shits the bed--possibly to a large fraction of the value of the property if, say, the tenant turns out to be somebody you'd see on "Hoarders" and you have to have a hazmat company come in and take the walls down to the studs. Occasionally, the stream of payments dries up when I'm between tenants, or when a tenant doesn't pay their rent. So long as I balance the stream of payments to have working funds to pay the mortgage and these large lump sums when they come due, everything is fine. I have a source of income, but I also have ultimate responsibility for the property and all of its costs.
Now, assume we're operating under your proposed system (for the sake of clarity, "seller" and "buyer" refer to the person who used(?) to own the property and the person making monthly payments in your proposal). I want to move to another house. I can't rent out the old house, so my option is to "sell" it. However, it's not clear to me how this works. I get a string of payments from the "buyer". However, who pays if something breaks? Under the current structure there is a very clear answer as to who is responsible for maintenance: the owner. Which makes sense, because they get to capture the value of any repairs. There could be various contractual arrangements about sharing costs with a lessor (for example, my current lease requires that I carry $100,000 in insurance for all types of damage that I could cause, and is very clear that I am 100% responsible for any damage due to frozen pipes), but at the end of the day, major repairs will occur due to the owner hiring a contractor, and if they can't get the money from their lessor, then that sucks to be them and I hope they priced that risk into the rent. (I live in an apartment, and if I forget to put out my morning pop-tart fire I can cause way
more than $100,000 of damage to the building.)
You do a bunch of handwaving above how if I'm the "buyer" I could buy some sort of insurance for maintenance, to include purchasing this insurance from the "seller" to be a quasi-landlord. By implication, this seems to imply that the "buyer" is responsible for property maintenance. However, if the "buyer" knows he's only going to be around for a couple years, if something really major is starting to go he could just say "fuck it" and walk away--or he could even do this if he just doesn't have the cash flow. This seems to then dump the property back onto me who now has the property again, but now broken. If the "buyer" had only been making payments for a few years, it's possible that I'm is now on the hook for repairs that far exceed the value of the payments I got that I'm going to have to make before they can try to "sell" the property again. You do further handwaving about how I should be able to legally go after the "buyer" in this situation, but the difficulty actually has less to do with the legal system and is more the fact that most people just don't have the assets to go after, even if the legal system was easy to use.
Further, if when does my responsibility extinguish? If my "buyer" has been making payment and doing repairs for 15 years, if they walk away am I really now responsible for "selling" the property again, even though I may have not been involved for a decade and a half (you seem to be otherwise assuming the "buyer" is more or less the owner as we now think of it, so do I as the "seller" have any rights to enter the property to inspect it)? If they don't walk away, but "sell" their interest to somebody else, how does my responsibility transfer? Do they have to pay me up front for the remaining 15 years? What if they can't sell their interest for enough to cover this because the area is economically depressed? Do I get the property back and can re-"sell" it?