Home Buying in San Diego>Question Details

Emily, Home Buyer in San Diego, CA

Can i rent to own other property after i do a short sale on mine even if i have bad credit and file chapter seven ?

Asked by Emily, San Diego, CA Sun Jun 26, 2011

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Emily, you asked: "Can i rent to own other property after i do a short sale on mine even if i have bad credit and file chapter seven ?"

Short answer is yes, if you can find a disparate owner or an unethical owner.

The bigger question is "Should you"?

In most lease options, the tenant pays a down payment and a higher than market rent in exchange for the option to buy the home at a later date. If you exercise your option and buy, the downpayment and the spread over market rent is usually credited to you for your down on the loan.

If you do not exercise the option, you loose the down payment and will not get any of the rent back.

There are some people that prefer tenants like you because they know you will not be able to exercise the option. They evict you and find the next victim.

Do not enter into a lease option until you are very sure you can get financing at the end of the term!!!
If you proceed, do some research on lease options or lease purchases. There is a lot of info on the web.

Dennis Smith, ABR, SRES, e-PRO, CDPE, Realtor® Lic #00476662
RE/MAX By-the-Sea, Carlsbad CA
0 votes Thank Flag Link Sun Jun 26, 2011
Hi Emily,

Sure you can, and you can even negotiate your option period to be as long as necessary to be able to buy a house again. If the seller wants the option period to be one year, you know you won't be able to buy that quickly. Investors use lease-options as an investment tool, betting that most renters won't be able to buy when the option period is up. Tread carefully; there's nothing wrong with renting until you can buy again. Prices won't be climbing that high anytime soon.

Warm regards,
Cory
0 votes Thank Flag Link Sun Jun 26, 2011
Absolutely, and I am actually helping someone with that right now. Buying a home on a lease option can be tricky, and has some specific pieces you want to be aware of that aren't a part of a typical transaction, so you want to make sure you are working with someone who understands them, and has experience with them. But they can be a great way for you to transition back into a home.
0 votes Thank Flag Link Sun Jun 26, 2011
Not for a while, though the financial burn of a Short Sale is by far less than a Foreclosure, you still have been burned for a while and it will be several years before you will be flying high again!
0 votes Thank Flag Link Sun Jun 26, 2011
Sure if u can find a landlord that will either a) not run credit report. B) run it but don't care that your credit is sub par
Just work on repairing ur credit afteryour shortsale. And contact me if u want to have it deleted off your report. I know of a loophole to repair your credit in less than 6 months. Sdrealtorpro@gmail.com
Web Reference: http://www.cityaaron.com
0 votes Thank Flag Link Sun Jun 26, 2011
If is unwise for you to do a lease-option-to-purchase because of your credit. When the contract ends and you are unable to obtain a loan because of poor credit you will loose the down payment money. But to answer your question you should have no problem finding someone willing to enter a lease-option-to-purchase contract because they know the chances of you forfeiting your down payment is very good. See my blog below for more informaton.
0 votes Thank Flag Link Sun Jun 26, 2011
As a property manager who does lease options about once a year for my clients, I'd have to say - absolutely not. As Sharon accurately states, it can be done if the owner is willing, but my owners require a renter/buyer to go through the same qualifying as if they are applying for a mortgage. I hope you find an owner you can work with, but be prepared for owners that do require good credit.
0 votes Thank Flag Link Sun Jun 26, 2011
This is a great question Emily. Many many Americans are experiencing this problem today so please don't feel alone in your circumstance. Absolutely you can rent to own if the owner/landloard is willing. It is actually to your benefit to short sale your home because that way the turn around for purchasing another home is much shorted than if your home would be foreclosed. Keep in mind also the effect on your credit is less. Usually a landlord would want you to lease the property for two years and than your credit should be good enough to get a mortgage loan at that time. I would talk to a mortgage loan expert to verify all options. If you would like a referral I can help you.
Thank you for your question.
Sharon
0 votes Thank Flag Link Sun Jun 26, 2011
Landlords aren't usually very choosy with credit history if you come with a large amount of money - like many months advance payments on rent, etc. A friend of mine went through a short sale, had many charge-offs and collections, and their new landlord didn't even check credit since they paid those 6 months of payments up front.

In a rent-to-own (commonly called a lease-option-to-purchase) the new landlord will probably also want to know you will be able to qualify for traditional financing within the time specified for you to exercise the option to purchase.

You are going to have both short sale & bankruptcy guidelines to navigate when it comes to that point, short sales with missed mortgage payments need at least 2-3 years depending on the loan program (without missed payments it's possible to purchase 1 day after a short sale with an FHA or VA loan), and bankruptcy guidelines vary widely but is generally 2-4 years from the discharge in a Ch 7.
0 votes Thank Flag Link Sun Jun 26, 2011
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