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FIRST ANSWER
Hi Mgm,
That sounds great... a real win-win... in theory. But, what happens if the note is brought current by the new player and then before title is changed, the current legal owner decides to (and is able to) sell the property? What if there is an acceleration clause in the loan that is in default which means that bringing the loan current does not just entail making up the missed payments but now might involve being liable for the entire outstanding amount.
Also, the loan against the property might not be one that makes any kind of financial sense. My advice to someone who has the funds to "bring a property current" would be to use their money for a down payment and closing costs. While I haven't worked with this particular organization I did take a look at their website and the same thing struck me that always strikes me when confronted with these types of deals:
1) What's in it for them?
2) How is this better than becoming a home buyer in a traditional manner?
3) If it is really such a great deal for all concerned then why isn't everyone in this situation doing it?
And the answers I am going with for myself are: 1) This one's simple - money. It's a business and while it might in some isolated instances be a good idea for all concerned, no one ever made a decent living catering to isolated instances. These folks sell a service and I am willing to wager that they, much like others of their ilk, are much more invested in the selling of that service and their customer's willingness to pay than they are in the outcome. I am not saying that they don't want things to work out but it is no skin off their nose if it doesn't.
2) Plain and simple it isn't. The system that works best (and is time proven to boot) is one where a ready, willing and capable buyer connects with a ready, willing and capable seller. A deal is struck and the property is sold with as few extraneous parties involved as possible. If you want to become a homeowner and to take advantage of the current supply and pricing then my advice is to get yourself an agent, find a home that works financially and otherwise for you and that is available to purchase and buy it in as straightforward a manner as possible.
3) This one should be the easiest to answer. Everyone isn't doing it because in most cases it does not make sense for anyone but the folks making money off of the deal.
A quick word on Rent To Own is probably in order here as well. This type of arrangement can make sense for a buyer in an ascending market who is having a difficult time saving the funds necessary to generate a down payment. Basically, a Rent To Own agreement freezes the pricing of a property at today's value for purchase at a preset future time. A portion of the rental payment is set aside toward the future down payment. This amount is not refundable if the Rentor does not purchase the property. It is a great deal if the price you freeze at today is lower than the one it will be tomorrow but not so swift in a descending market where every indication is that the price tomorrow will be lower than the one today and you are contractually committed to the higher amount.
All in all, I would say if you are financially capable and desirous of entering the housing market today and find a home that works for you available now then jump in. If not, keep saving (more money is always better) keep maintaining or improving your credit and wait till things seem more favorable to you.
Hope that helps.
Thanks for asking the question. Take care and have a great day!
Tisza Major-Posner, Realtor, IVPG Realty (909) 837-8922
Mon Jan 12 2009, 14:37
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