Short Sale - He Wants To Stay?
Here is the situation:
House in foreclosure, I have Warranty Deed. I'm negotiating with lender for short sale.
The seller has recently got a new job and would like to stay in the house. He has offered to rent the house back from me at 1.5 times the current house payment.
Are there any risks/issues with this besides that fact that since he was in foreclosure once already he may decide to stop making payments once again?
After the short sale the house should have around 30% equity, I'm thinking refi, pull out equity, and just keep renting the house until he wants to buy it back or move.
Thoughts?
Regards,
Jeremy B
Sounds like a pretty SWEET deal to me... The key word is "rent".. You said, "he wants to rent it back"... So, if he decides to stop paying "rent" then, he gets the boot!
Happy hunting!
I have heard that there is a law saying that I can't sell the house back to him for 1 year if I buy him out of foreclosure.
Anyone know anything about that?
Who cares? Have the guy sign a 2/yr lease...(rental or whatever)
You had it right the first time! Sounds like you're second guessing...
Heck, if he's willing to pay 1.5 times the rent and after ALL of that you still come out w/ 30% equity.....
I'd hog tie this guy so he couldn't get away!
[addsig]
if they couldn't make the payments before, even with the new job, I would be learby about renting to them. If you must agree to make the deal work make sure you get a signed lease (acknowleding that they are a tenant and not some equitable owner of the property).
You will need to make sure you structure it so it will not appear as a loan. If it does appear to be a loan then you will have usury laws to contend with. Meaning that if you are making a lot of money you can have everything taken away from you because it was a illegal loan. I personally stay away from these types of deals.
Tom
Here is a copy of an article by William Bronchick on this topic. This article is on this site but I am not sure how to link to it so I will attempt to paste it.
. If the court agrees, the loan is illegal, since it is usurious.
Wednesday, July 17 @ 05:00:00 EDT
Contributed by: BillBronchick
I recently attended a "free" seminar on how to "get rich quick" in foreclosures. The speaker had a different angle than the usual "steal it from the homeowner" method.
The speaker suggested that you approach the homeowner with the following plan:
Tell the homeowner you will make up his back payments and give him some cash
Take title to the property.
Lease it back to the former owner with an option to buy it back for one year.
The speaker suggested that after one year, the house would be yours if the former owner didn't exercise his option. Sounds great doesn't it? You could beat out all your competition who are trying to "steal" the same house.
Well, here's the catch. The poor homeowner in foreclosure will be your best friend when you make up his back payments. However, when the year is up and he can't get his house back, the trouble will begin.
In a number of cases, these homeowners will go to court and claim that the "sale/leaseback" was really just a disguised loan. He or his attorney will ask the court to "re-characterize" the transaction as a loan and place title to the property back in his name (for an in-depth discussion of sale/leaseback re-characterizations, read "How to Structure Sale-Leaseback Transactions"
Here's how it works: Let's say that you find a house in foreclosure worth $100k. The balance of the loan $50k, and the homeowner is behind $5k. You agree to make up the back payments of $5k and take title. You then lease it back to the homeowner with an option to buy it back for $100k, its fair market value. What's the problem?
The problem is that if the court re-characterizes the transaction from a sale/leaseback to a loan, you have loaned the homeowner $5k at 1000% interest! Think about it . . . you give him $5k, and he has to pay $50k ($100k option price minus the $50k loan balance) to get his equity back. 1000% interest is usury, and the court will set aside the loan. You will lose the house AND your $5k.
If you're not familiar with the word "usury," it means charging more interest than permitted by law. The consequences of a usurious loan are usually civil; the court will declare the loan void and the borrower won't have to pay it back. If you get caught making usurious loans on a regular basis, you'll be hearing the words "loan-sharking" and "racketeering." These are CRIMINAL acts that will get you in jail. Many foreclosure real estate investors have been indicted on racketeering charges for doing exactly what I described above.
Note:
William Bronchick Esq. is a an attorney that specializes in Real Estate transactions and Asset Protection. For more information
[addsig]
This is why I highlight "RENT", as this is what the original homeowner suggested... Renting/Leasing is a FAR cry from Lease w/ Option. An option also ties up the property w/ someone that to-date hasn't proven their ability to stay current...
VERY GOOD ARTICLE THOUGH!!!
Look folks get the guy out of there and RENT it to a good renter what the heck is wrong with you. You have the greatest leverage NOW not in a year!!!
The guy can come back at you almost anyway he can IF he is still in the property get rid of him with some kind of questionable contract>ANY contract can be questionable especially if there is an issue of the person poor little rights being violated!!!!
U will also find > if you look at his past histroy of being late on all kinds of payments and most likely the house loan.
It is one out of 30 that are not like this but even with MR 1 out of 30 get rid of them.
Make it clean with NO liablity PERIOD.
But I guess if most here have no properties or assets well what the heck press your luck.
But if you have assests and have done well then NEVER NEVER go that route.
I only do 3-4 deals a year with 40% gain and NO liablity...............I am careful and only do deals that fit the parameters.
BE PATIENT
SKI