Has anyone worked with investors who buy properties through a short sale, lease it back to homeowners, and then let the HOs buy back the home in three years with good credit at TODAY'S market value?
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Not sure that applies here Jason, here's why......For it to be a short sale in the first place the owner would have to prove to the existing lender a change in status, job, medical and so forth for the lender to approve the short sale. If it is approved the bank will process, appraise and either agree or disagree with price (all normal short sale to this point) At that point it closes and the ownership changes, there is no refinance.
At that point the previous owners lease from new owner under a 3 year lease, or in Florida it would be a 1 year lease with 2-1 year options to avoid having to be licensed as a property manager. Hopefully the finances are organized and credit gets back on track to qualify for a new loan in the 3 year period.
At the end of 3 years the renters have the option to purchase at a fair market price using the lender of their choice it would still be considered a normal transaction. No predator lender thus far. This seems to be a very legal transaction all the way around but it would change if the investment group were the ones that did the financing or forced the use of a particular lender with terms outside normal financing, if that is the case there would be legalities. I doubt any investment group would try to do the financing, they are not banks and don’t have the long term goals, more than likely just the 3 year plan.
Now lets say that you were the individual who bought the property and you are the one that needs a renter, that renter happens to be the former owner and they can prove to you they can afford the rent that you are asking, would it be fair for someone to tell you who you can and can't rent too? Lets say that after 3 years of renting that person is willing to purchase your investment at a fair market value and has qualified and secured financing, Who has the right to tell you you can't sell it to that person?
refinance.at - refinance Resources and Information.
refinance.at is your first and best source for information about refinance . Here you will also find topics relating to issues of general interest. W…
Tony, so glad you mentioned the 1 year lease with 2 - 1 year options. I didn't know that the reason was to avoid being licensed as property manager. The investment group I am investigating is doing that. After 1 year, they ask if the buyers want to continue, move, or change their mind. Also, they have a preferred lender that you may have to qualify with, but are not forced to use them. You can use any lender you want.
I am looking at arm's length guidelines and only see that the seller - buyer can't be family or friend because there may be an arrangement to buy under market value. I'm having a hard time finding anything wrong with this idea. If anyone else has any objections to this I would like to hear your ideas.
I was under the impression that it is illegal. I believe I had read somewhere that it is viewed as predatory lending because it is viewed as lending the money to the owner in order to keep their home. There is also the implications of an owner electing to short sale in order to "refinance" at a lower value.
It makes too much since for the banks to consider it. By the time they figure it out, it will be too late, however it certainly is a WIN WIN. I got an email from one of my preferred lenders informing me that 12 months after a short sale assuming there re no other late payments on other dept, they can qulify to purchase a residence. Nothing illegal about that, and its gonna take the millions with great credit that had to shortsale, to get back into the market to bring it back..
I would be concerned about illegal if a bother, was short selling to his sister, or vice versa.
Jonathan, my preferred lender told me the same thing, she qualified a couple for a new purchase one year after a short sale. It's my understanding that after 2 years they can buy FHA and 3 years as a first time buyer. Does that sound right?
Jonathan > Jan Baron, RDCPro, CSP, BPORJanuary 27, 2010 at 5:56pm
This might be a great way to help some of these folks that are losing their homes, as far as the legalities, I the think the investor groups have this covered, it is still an arms length transaction because the homeowner loses their house just like any other short sale, there is no sell back at this point, the investor has a right to lease their property to whomever they choose. They more than likely have a separate agreement for the purchase in which the 3 year period is an appropriate time for re-purchase, I think in most states you can be considered a first time home buyer after 3 years and many statutes use the same guideline.. Sounds to me this is a pretty slick way for an investor to buy, have a lease in place, then resale their investment without ever having to search for a renter or hire a management company.
The only part I don’t get is this seems to be weighted more towards the buyer if they truly are allowed to buy at today’s prices. The investor is basically only receiving rent for 3 years and is not taking advantage of the appreciation. I would think there would be a decent value increase in 3 years from today’s prices; if not……we got bigger problems to worry about.
Tony, this was clarified to me today...that the home would be sold back in 3 years subject to the appraised value at that time. Yes, that makes more sense for the investor. Hopefully, prices will be better at that time but not crazy like 2002-2007. Win-win for both parties.
Tony Linton > Jan Baron, RDCPro, CSP, BPORJanuary 27, 2010 at 4:56pm
Thanks Jan, That makes perfect sense, the people that will benefit the most are the ones who purchased on the top of the bubble and your'e right "Win-Win". Bought for $400k, short sale for $200k, pay much less for rent for 3 years and clear credit, buy again for $250-$275. Very slick! Maybe the banks should consider this formula.
Replies
At that point the previous owners lease from new owner under a 3 year lease, or in Florida it would be a 1 year lease with 2-1 year options to avoid having to be licensed as a property manager. Hopefully the finances are organized and credit gets back on track to qualify for a new loan in the 3 year period.
At the end of 3 years the renters have the option to purchase at a fair market price using the lender of their choice it would still be considered a normal transaction. No predator lender thus far. This seems to be a very legal transaction all the way around but it would change if the investment group were the ones that did the financing or forced the use of a particular lender with terms outside normal financing, if that is the case there would be legalities. I doubt any investment group would try to do the financing, they are not banks and don’t have the long term goals, more than likely just the 3 year plan.
Now lets say that you were the individual who bought the property and you are the one that needs a renter, that renter happens to be the former owner and they can prove to you they can afford the rent that you are asking, would it be fair for someone to tell you who you can and can't rent too? Lets say that after 3 years of renting that person is willing to purchase your investment at a fair market value and has qualified and secured financing, Who has the right to tell you you can't sell it to that person?
I am looking at arm's length guidelines and only see that the seller - buyer can't be family or friend because there may be an arrangement to buy under market value. I'm having a hard time finding anything wrong with this idea. If anyone else has any objections to this I would like to hear your ideas.
I would be concerned about illegal if a bother, was short selling to his sister, or vice versa.
Short Sale Hud Guidlines.pdf
The only part I don’t get is this seems to be weighted more towards the buyer if they truly are allowed to buy at today’s prices. The investor is basically only receiving rent for 3 years and is not taking advantage of the appreciation. I would think there would be a decent value increase in 3 years from today’s prices; if not……we got bigger problems to worry about.
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