Home Selling in Nevada>Question Details

Rachel Wentw…, Other/Just Looking in Las Vegas, NV

Seeking real estate investor to purchase our home, rent back to us, then sell back to us in 1 year.

Asked by Rachel Wentworth, Las Vegas, NV Sat Feb 7, 2009

Our home is now worth $250K, but we owe $650K on it. We'd like to short sell to an investor for $250K, then rent back for market rent (about $2K), then buy back from investor after 1 year for 5 percent premium, or $262,500. The investor gets excellent short sale price, hassle free tenant and buyer, and a very nice return on investment. A win win deal for both parties. The only obstacle is whether the lender will approve the short sale. We have excellent income, but realize it will take at least a decade for property values to get back to what we owe on it. We don't want the hassle of moving and would like to live here for the near term. So, 3 questions: Must a short sale be offered for sale on the MLS? Are underwater properties considered a hardship? Any interested investors out there?

Help the community by answering this question:


If you are willing to bail on a mortgage company because the value went down then you would do the same to an investor. That is not a sound investment strategy.

Are underwater properties considered a hardship? NO, unless it was due to the fault (fraudulantly)of experts involved in the transaction IE, Mortgage broker. Appraiser

Any interested investors out there? Yes but hopefully smart enough to stay away from this.

Must a short sale be offered for sale on the MLS? I have not found a lender that will work with a FSBO.

Please let me know if there is currently any legislation prohibiting this: http://www.fbi.gov/publications/fraud/mortgage_fraud07.htm

Mortgage Fraud is defined as the intentional misstatement, misrepresentation, or omission by an applicant or other interested parties, relied on by a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan
3 votes Thank Flag Link Sun Feb 8, 2009
according to wiki: Collusion is an agreement, usually secretive, which occurs between two or more persons to deceive, mislead, or defraud others of their legal rights, or to obtain an objective forbidden by law typically involving fraud or gaining an unfair advantage. It is an agreement among firms to divide the market set prices are limit production. [1] It can involve "wage fixing, kickbacks, or misrepresenting the independence of the relationship between the colluding parties."[2] All acts affected by collusion are considered void.[3]
2 votes Thank Flag Link Sun Feb 8, 2009
Thumbs up from me,David for a very good answer.
2 votes Thank Flag Link Sun Feb 8, 2009

I do not want to even address the Fraud but there are some potential problems with your scenario.

1.) If you short sell your property you will not be able to get another new loan to purchase any property for a minimum of three years.
2.) What happens if the home goes down in value even further than it has already and when you want to buy it back it will not appraise for $262,500
3.) No investor in their right mind would take on this risk for a potential 5% return.
4.) My understanding is that for the short sale to be approved you will need to prove a hardship, just because the property went down in value does not constatute a hardship.
5.) If you do not use a Realtor then who is going to negotiate with the existing lender to get your short sale approved?

Ron Johnson
Elite Realty
2 votes Thank Flag Link Sun Feb 8, 2009
I wish I went to law school then I might know more about FRAUD.
2 votes Thank Flag Link Sun Feb 8, 2009
the first mortgage has already adjusted by 2 points, thereby increasing the the mortgage payment by almost $1200 per month.

Rachel, may I ask a question? Did you not know when you took out this mortgage that the payment could go up that much? If "yes", what did you plan on doing when it did?
1 vote Thank Flag Link Sun Feb 8, 2009

Thumbs up to you for your honesty! i play straight up & fair & appreciate anyone else who does the same.Fraud by another name is still fraud.
1 vote Thank Flag Link Sun Feb 8, 2009
in support of David,i have just one word to offer you--it's COLLUSION!and can get you and your investor in major hot water.
1 vote Thank Flag Link Sun Feb 8, 2009
You may want to confer with a real estate attorney prior to an adventure of this nature.....

It's certainly acceptable to think outside the box.....but in doing so it's important to stay on the right side of the law.

Best wishes.
1 vote Thank Flag Link Sun Feb 8, 2009
Your "excellent income" makes you not a hardship. What's in it for an investor in your scenario, Rachel?
1 vote Thank Flag Link Sun Feb 8, 2009
I've just been talking to the FBI about this very topic. Want to hear what they have to say?
Visit the "contact me" page of my website (address below) and email me directly.
Kathleen Doler
Freelance Journalist, Real Estate
0 votes Thank Flag Link Wed Feb 15, 2012
Hi Rachel,
Please email me about this post.
0 votes Thank Flag Link Mon Sep 14, 2009
In response to David Chamberlain's comments, how can we be committing mortgage fraud if we're not applying for any mortgage? The investor would be financing the sale back to us.

I do need to clarify that we do have a bonafide hardship: the first mortgage has already adjusted by 2 points, thereby increasing the the mortgage payment by almost $1200 per month. If the lender approves the short sale because of this hardship, how is that fraud? The fact the property is underwater just makes the situation worse.

I read your link to the FBI report but cannot determine exactly what is fraudulent about my proposition? Please clarify?

The only risk to the investor is the decline in property values in the short term, which we both should know is highly likely. Therefore, we would need to agree on such terms as length of agreement, determination of purchase price, etc. beforehand. This is our due diligence. These are contingencies that any investor would have to consider in any deal. In the current environment, Investors are purchasing REO and short sales all the time. What's wrong with renting it back to the homeowner, and then selling it back to the homeowner, if both parties are so inclined? Fannie and Freddie are already leasing back foreclosed homes to existing tenants, as well as to previous homeowners. What's wrong with private parties doing it?

So, please clarify the "fraud" in my proposition. You know, I have to admit the entertainment value of these forums. I didn't realize there were so many 'fraidy cat real estate "pros" out there--afraid to venture out into uncharted real estate waters. Everything I have proposed so far has been of the utmost integrity. Just because something hasn't been done before doesn't mean it's fraud. That's why they call it the art of the deal.
Of course, everything would need to be approved by our respective attorneys.

So, any REAL "pro's" out there? Or are most people weak, scared, quick to judge, and lack the courage to pursue and investigate an opportunity because of their own ignorance and lack of wherewithal? (This is more of a philosophical question.)
0 votes Thank Flag Link Sun Feb 8, 2009
Thanks for the advice, folks.

Our servicer is Countrywide and my understanding is they will not pre-approve a short sale––they will only review the short sale offer after it is actually submitted for approval. So, as long as they approve the short sale offer (with absolutely no fraud, of course), why should it matter what the real estate investor decides to do with the home, including renting it back and/or selling it back to the previous homeowner? Please let me know if there is currently any legislation prohibiting this.

What's in it for the investor is interest income of almost 10 percent per year ($2,000 rent x 12 months = $24,000, based on purchase price of $250,000), less any financing costs if the investor decides to obtain outside financing, less real estate taxes and insurance, numerous tax benefits, a premium over the purchase price, and best of all a hassle-free tenant and buyer . This beats any jumbo CD currently paying a paltry taxable 2 percent. There is a risk that the property value may continue to decline for the near term; however we can overcome that with a pre-agreed TBD purchase price. Ideally the investor will finance the sale back to the previous homeowner, thus eliminating any waiting period for the previous homeowner to qualify for a government loan due to the short sale, and the investor will continue to earn interest income on the loan . Of course, all terms are negotiable and we both should do our due diligence.

This is an opportunity for an experienced investor who appreciates creative dealmaking and thinking outside the box. You would think that lenders would simply allow homeowners to short refinance their home and remain in the home; however my understanding is that lenders are extremely reluctant to reduce principal on an existing loan. Yet, they are willing to reduce principal via a short sale if you are a NEW buyer. Brilliant, isn't it? By the way, the Hope for Homeowners program is a joke.

So, any investors out there willing to make a deal? Or any agents out there willing to facilitate this deal?
0 votes Thank Flag Link Sun Feb 8, 2009
Thumbs up for a good answer,Ron.
0 votes Thank Flag Link Sun Feb 8, 2009
I'd love to talk to you about this...please contact me thru my site below.
0 votes Thank Flag Link Sat Feb 7, 2009
The Hagley G…, Real Estate Pro in Pleasanton, CA
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