Illegal To Buy Out Defaulted Owner In Ca And Lease Back
I just came across a from a legal article to lease back to defaulted seller his own home. I have investors in my area who are doing this all day long! its beating me out of the arena..but come to find out they may be walking on thin ice if one defaulted owner gets educated on this deal and cries out. I thought it was ok to tell the homeowner I would make up back payments, give him cash, take title to property, lease back to him for the option to buy back in one year. Isn't this a "disguised loan" Would his/her attorney ask the court to "re-characterize" the transaction as a loan? I would pay back the $5k rears ( a loan) then ask him to buy me out a year later at FMV of $100k , I just made 50k on a loan of 5k! According to the courts..this is "usury" at 1000% interest! Realtors turned investors are doing this ...how do I know... because just today a defaulted homeowner I visited to me if I can beat that deal he was just offered by the realtors! Just as I was getting better a this .... a get a curved thrown at me!
Sorry about my spelling and typos I just re-read my topic and caught typos...sorry
Brainstorm,
You are correct, doing this could be very costly to you. You can, however, move him to another property you own. He just can't stay in his current home.
Also, with regard to the typos, you can edit your message by clicking on the edit link.
Thanks Norton...I thought so, this is only legal as I read more into it that by having the owner/seller move out is the way to have it done...but what about those that do not want to move out because they love their house...its very buttercupped up...and their cute children love their home, neighborhood, school, and friends...is there such thing as another approach like...equity sharing?
Absolutely not. It is their choice. If they want your help, they will have to move. If they get foreclosed on, they will have to move. The only possible way around it is to sell it to another investor, and have them lease it to the current owner, but even that would be a little dicey.
I totally agree. Very dangerous to leave them in the house, and the minute they get in trouble again, you're in trouble with their claim of a usurious loan.
It's sure happened here in WA State, and while I don't know what other states, it's sure be claimed all over.
The reason the brokers are doing this type of investing is b/c they are considered fiduciarys to their clients and b/c of those duties, are not subject to usury.