There has been a recent disturbing trend of furnace rentals in our City. Let me explain why I am so disturbed by this.
Most often, here is how it happens: a very aggressive salesperson comes to your door and gives the distinct impression they are officially sanctioned by Union Gas or Ontario Energy to "test" the efficiency of your heating system. Are you aware of the new regulations and the rebates for upgrading? Are you aware that you could have carbon monoxide leaking from your furnace as we speak? We are here to perform a needed public service! We are here to help you!
It seems urgent, they seem to know and truly believe what they are saying, AND they are on your doorstep because they were sent by the government to potentially save your life! Why wouldn't you let them in? Your family could be in danger!
Now the rep performs their "testing". I admit I have not been witness to this part of the pitch, but I do know that most of these "tests" are a fail. You need a new furnace, and you need it RIGHT NOW!
Oh, you don't have $3000 available just now? No problem, we have a rental program! For just $80/month, we can hook you up! AND, we will service your furnace FREE every year! What an awesome deal!! You'd be crazy not to sign up. ALSO, for another $80/month, we can give you a brand new central air conditioner unit too! It makes perfect sense to do them both at the same time, and you really should. We will take care of everything for you.
So, it all sounds great. Brand new furnace & air, free service, and total peace of mind for just $180/month. Contract signed. The deed is done.
Now, let's fast forward a few months. You now need to sell your house, for whatever reason. You have this brand new furnace & air, with free service ~ a great selling feature right?
Wrong. A liability. That brand new stuff is not paid for yet.
Well, maybe the buyer will just assume the contract? Let's dig out that contract and read the fine print. The buyer will need to know the terms.
Contracts vary slightly from one company to the next, but, in a recent sale I had, the contract was for a 15 year term. Let's do the math here ~ 15 years at $180/month is $32,400!! That's a LOT of money for appliances valued at roughly $6000 isn't it? Oh, but wait, service was included. My service guy (I own my furnace), charges about $100 to do an annual service call. New furnaces also have a parts warranty by the manufacturer. I hardly think that extra $26,400 is necessary to cover your service needs. For that money, you could replace your furnace and a/c FIVE times and still have money left over.
So, back to your potential buyers. They have done the math and are wondering why they would pay full market price for your home, then pay another $30,000 for the new systems. It's not going to happen. But wait, there is a "buyout" clause! The salesperson mentioned that we could buy out this contract at any time! So, how much is it? In this particular case study, it's $14,000. For real. Still a LOT of money.
Who will pay this buyout fee? A few months ago, you didn't have the spare $3000 to buy a furnace, do you now have a spare $14,000? In my case study, we actually did manage to get this amount reduced (after many letters, phone calls and emails from the homeowner, myself and their lawyer). The new "negotiated" buyout was $10,000. Still a LOT of money. Still a barrier to the sale. From the buyers point of view, you are trying to sell him/her a house without a furnace. Somebody has to pay for this or the house cannot be sold. This "debt" is registered as a lien against your title.
The money will have to come from the proceeds of the sale. If you are competing with a similar house down the street priced at $200,000 including furnace & air, what is your home now worth? You got it. Less money. $10,000 to be exact.
Suddenly that "easy" rental idea doesn't sound so good.
Always read and understand the fine print before you sign the contract! Better yet, save yourself some time and don't let them in! In this case, the rental contract lasted 15 years, but the homeowner would have to continue paying the rental fee until the systems were replaced. (The homeowner thought this was a "rent to own" situation). The rental company would happily remove the units at a cost of almost $2000, PLUS any dumping fees, PLUS any travel time required. And yes, they MUST be removed by the company.
In my opinion, this is criminal. The aggressive sales pitch gives you a problem you didn't even know you had. A potentially dangerous problem. Good thing they can "help" you.
I have come across this situation on several occasions this year and it has NEVER benefited a sale. It is ALWAYS a road block. It scares me to think how many people have been taken advantage of in this way. Losing this kind of equity in your home can be devastating in many cases.
I will concede that there may be instances where system rentals may be a good thing, perhaps in a large investment complex, for example, but I cannot think of one instance where this would benefit the average homeowner. Not one.