Posted by Rick Denney on January 17, 2002 at 16:52:06:
In Reply to: Re: Re: Rent to Own Tuba? Or Not? posted by David on January 17, 2002 at 16:11:08:
I agree with everything you say. I believe I did mention the risk. But I don't think that means the fellow can't under any circumstances find a way to meet the need.
And you are right, pursuing it in court will likely cost as much as the horn (is there an echo in here?). Court is the last resort, when the scorched earth of a ruined credit rating is all you have left.
That's why you have to find someone whose credit reputation is both valuable to them and vulnerable. If the parents go to your church, that's a data point. If the teacher will co-sign, that's another data point. If they have a glow-in-the-dark credit history, that's still another point (though a small one, and unlikely in this case). If the kid pays you 12 timely payments on a layaway plan, you might decide you can trust him for the remaining 6 if he demonstrates the right attitude. You don't have to be a music-store owner to know how to look people in the eye and decide if you can trust them.
Of course, you still may get burned, so you figure out how to minimize the risk. For example, if the teacher is a friend of the seller, the seller at least knows that the instrument in question will be within reach from time to time. If the buyer defaults, the seller can show up to a lesson and repossess it, refunding the amount paid less the cost of repairs. That will stand up in court in almost any state, and the burden of pursuing it will be on the buyer once the horn is back in the seller's hands. The seller just has to document everything very carefully, and notify the buyer reliably (e.g. certified mail) that the loan is in default and the collateral is subject to repossession. Car creditors do it all the time. You can even hire a collection agency for a percentage of the recovery, and you are entitled to collect the cost of it in addition to what is owed.
My point in my post was to let the fellow decide for himself what his risk comfort level was, and just tell him what his options are. He can run away or choose one of those options for himself. A categorical "no way" seemed to preclude the possible arrangements that could work, and have worked in my own case. I decided to make the sale now in progress because of the opportunity that had been afforded to me--a way of paying the favor forward. In both cases, it was the only to get the right horn into the hands of the person who could most appreciate it.
Rick "with no shortage of business experience, but not wanted to slam doors" Denney