Can I buy back my foreclosed home?

Asked by Tyson411, 34758 Mon Jul 27, 2009

Can I let my house go into foreclosure and then have a friend or relative buy it and sell it back to me? I would be able to knock 100K off my mortgage by trying to buy back my home as a foreclosure. Thanks!

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Louise Warri…, , Lake Mary, FL
Sat Aug 8, 2009
Hi Tyson --

OK, here's how real estate sales go:

A Seller advertises a house for sale (lets say $320000),
A Buyer (you) agrees to buy the house at a set price (lets say $300,000) and goes to a mortgage company to lend you the money (lets say 100% mortgage, so the bank loans you $300,000)
At closing, the bank gives the $300,000 to the Seller and gives you a note for $300,000 and you start making payments.
Two years down the road, the market has gone down and your home is worth $200,000,
You decide to let your home go into foreclosure. The bank has $300,000 in this house (the money the original Seller walked away with) and gets back a house that has a "today value" of $200,000. By the way, the bank also spent $75,000 in going through the court filings, appraisals, servicing costs, has probably paid off the property tax liens, etc., and now has $375,000 on your house. When it finally goes on the market they sell it for $190,000 or a total net loss of around $185,000.

So--where is the mortgage fraud in your scheme? If you are the one who, through a friend or family member buys it back for $190,000, you (and btw your family member or friend) have just perpetrated a fraud on the bank by passing off that loss of $185,000 (real money) to their balance sheet. (Not to mention that there were a bunch of falsehoods you would have to tell to get to that point which gets you into moral issues, as well as legal issues). Your question about "how will they find out" and "are they even looking for things like this" is a question a lot of criminals probably weigh while they're plotting an activity. Don't get caught up in this type of thought process.

I don't think you're overtly trying to figure out how to perpetrate a theft. I think you're just trying to make a good financial plan. I feel your pain as you look at your mortgage statement and realize you're paying on an obligation that is higher than the value of the house IN TODAY'S MARKET. (Sorry, I can't put this in italics the way I'd like to--don't mean to shout). Since you don't have to move, you are able to make your payments, and don't actually have to take the loss, you can feel reasonably confident that the values will come back up to where they were when you bought (though it make take years). Real estate always appreciates over time--it's just the timeframe that is at question here (if you can wait long enough, you won't lose money). We'll come out of this eventually and if you made a good choice of location/condition and continue to keep the property maintained, you should fare OK.

On the other hand, if more people take the attitude that they're going to bail out and cut their losses, the market will take longer to recover, more people will be hurt, and heaven knows the government will feel the need to step in and confuse the situation even more.

Here's what I suggest. Stop thinking about it and don't do something foolish. :-) This is advice I give myself as I file away my retirement statements without opening them (since I have no intention of selling my stocks at the moment). As Scarlett O'Hara says "I'll think about that tomorrow."

Good luck! Have a great weekend.

Louise Warring
Coldwell Banker Residential Real Estate
0 votes
Of course a realtor is going to give you that type of advice, because he/she stands to gain nothing from you doing this and possibly pushing home values down in that neighborhood (even if temporarily) and that would not be good for the realtor either. My friend bought my over valued house at auction for a fraction after I walked away from it due to a foreclosure and I bought it back for over half of what I originally paid. Fraud? Hardly. After I paid $2500 a month for 6 years on an interest only loan and then the bank sold it for $140k at auction (house was originally $360k) they more than made their money back on a home valued currently at $270k. Oh, I forgot to mention, this particular bank was one of many bailed out by the government to add even more insult to their scheme. So Louise, sorry you have such a twisted opinion on individuals getting their financial situation in order, but your answer is complete and utter b.s.
Flag Sat Oct 11, 2014
Louise Warri…, , Lake Mary, FL
Mon Jul 27, 2009
Good heavens! What you're describing is mortgage fraud, pure and simple.

No, you can't do this unless you really want your next "home" to be an 8 x 8 foot space, with no view except what you can see through the bars!

Try reworking your mortgage legally and ethically with your lender. If you can't make the payments, tell the bank and let them take it back.

BTW, I'm shocked at the agents' answers.

Louise Warring, e-PRO, CSP, CNS
Certified Short Sale Professional
Coldwell Banker Residential Real Estate
2 votes
Tarahayley, Both Buyer And Seller, Providence, UT
Tue Aug 18, 2015
The right of redemption is the right of a homeowner in foreclosure to “redeem” the mortgage and keep the house by paying a certain sum of money within a certain period of time. Depending on the laws of their state, homeowners in foreclosure may have two separate rights of redemption: a pre-foreclosure equitable right of redemption and a post-foreclosure statutory right of redemption.

If you need help with the short sale aspect of things -
1 vote
Louise Warri…, , Lake Mary, FL
Mon Jul 27, 2009
Upon further thought, and thanks to PoincianaHome, I am going to put a caveat on my previous answer. When I read your question before, I was thinking that you were going to try to do a short sale and have a relative try to purchase the home short and then sell it back to you. That, I believe, would be mortgage fraud, pure and simple.

I'm not sure about the scenario you describe, i.e., that your home was already taken back by the bank (after you suffered the loss, assuming there was one, and damaged your credit). Since you are planning this, though, in order to "knock 100K off my mortgage", I still think it qualifies as mortgage fraud. There are certain things that make up "fraud" and it seems to me, you'r e listing several of the criteria here that qualify. I would highly recommend you seek the advice of an attorney before you set this plan in motion. Realtors aren't really qualified to give you the go ahead.

My biggest question is, where are you going to get the money to "buy back" the house from your friend or relative? You're not going to be able to get a mortgage with a recent foreclosure on your credit (especially when they notice you're trying to re-purchase the house you just lost), and if you have money to pay cash, why aren't you using it to pay your mortgage in the first place?

Just one other question--The housing market (and therefore values) is down all across the country. What do you think would happen if all of us decided to "knock 100K off our mortgage" this way? It was greed and poor decisions that got us into this mess. Lets not compound the problem with more of the same.

Good luck.

Louise Warring
1 vote
please I need some advice I do not want to comit fraud or try to devalue the home this is the truth once a year me and my friend and some other guys find a place that is in disrepair from dapretion n this place was so dirty with garbage that we couldn't get any volinters nore could we get a bine to haul away all the dippers and 20 years of filth so the owner 70 year old lady hires us at cost but after we have sunk in $35,000.00 she vtells us the house is in foreclosure and has no money but tells us that she would put us on the title and we would have to find some one to re mortgage
Flag Sun Jul 24, 2016
PoincianaHome, , Poinciana, FL
Mon Jul 27, 2009
I just recently sold a home in the 34759 zip code where the previous owner submitted a bid on the home they lost through foreclosure. I contacted the Florida Association of Realtors Legal Hotline regarding this matter and their response was something like "so why are you calling us?"

In the end the house did not sell to the previous owner but only because it was not the very best offer we received. Sure there were ethical issues by the previous owner but mortgage fraud?

"No," as judges like to say in cases like this, it does not rise up to the level where it violates any current Florida statutes. (I would challenge any REALTOR to prove otherwise.) In addition, IMHO, mortgage lenders hadn't been ethical with loans sold to thousands of Hispanics over the past decade, so why should any human beings be held to a higher standard than business?

If you are interested in buying a home in Poinciana, please contact us. We'll be glad to discuss the matter with you.
1 vote
Kryvoy_oleg, Home Buyer, Kissimmee, FL
Sun Apr 23, 2017
I want let my house to foreclosure and then my relitieve willl buy it back for me.
Can I tell this to back right the way? that I alredy have a new buyer ready .
Why am I doing all that I need remove other people from deed
0 votes
Milton Ocasio, Agent, Orlando, FL
Tue Jul 9, 2013
That`s illegal , The Federal Government can comeback to you and file charges for committing fraud.
0 votes
rjfre, Landlord, Middle Island, NY
Sat Sep 4, 2010
Do the right thing. Hang in if you can make the payment on the motgage. Look for an investmemt property to mak up for the paper loss on your current home. If you invest wisely you will have monthly cash flow on your investtment property in addition to making up paper losses that make up for the loss you incurred on your current propetty, Tthere are paper gains to be maid if you invest wisely.
0 votes
Tyson411, Home Buyer, 34758
Fri Aug 7, 2009
My home is not currently in foreclosure, but I've been debating letting it foreclose so I can have someone buy it for me and sell it back to me. I don't want to get myself into trouble, but how would the bank find out that I moved back into the house? Are they even looking for things like this, with so much crisis going on in their companies? What part of this plan is the actual mortgage fraud? And how would I get caught? Just wondering, trying to make a good decision here. I can afford to keep this home at the current payment, but why would I pay 100K more for it than it's worth right now? Just because I bought it at the top of a bubble. If I can ditch 100k without getting in trouble, I would like to.
0 votes
Billyc4502, , Maine
Wed Jul 29, 2009
as soon as the bank knows its back in your name (and they will) they will sue you for any deficiency and probly place a lein on it when they win a judgement. if not the bank itself then the collection agency they sell the worthless note to
0 votes
Carlos German, , Central Florida, Orlando, Kissimmee, Davenport, Reunion, Celebration and Clermont area Vacation Homes
Mon Jul 27, 2009
Hi Tyson,

If you let your property go into foreclosure, how do you plan to buy it back? A foreclosure will ruin your credit for over 7 years and you will not get a loan, or even a new credit card, during that period. Not only is this a very bad idea (Legal wise) but it is also impossible if you are planning to finance. If you are a cash buyer when you decide to buy your home back, beware of the bank finding out what you did. It could have legal ramifications.

When someone tells me they want to willingly let their house go under foreclosure I always ask them; how much is your credit worth? $100k, $50k??? 7 to 10 years without credit isn’t worth that amount in my opinion.

Best of luck!

Carlos German
When in doubt, talk to a Realtor who understands your goals.
Am I that person for you? There's only one way to find out…
Contact me today! 407 744 7190 or
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0 votes
Marty Kaiser, Agent, Orlando, FL
Mon Jul 27, 2009
Hi Tyson,

Without going into all of the pros and cons of your strategy both from a practical as well as an ethical perspective, you could start the short sale process, completing all of the bank's required paperwork etc and have your relative write an offer just as if he were an arm's length purchaser. Generally speaking, if your relative/friend is qualified and has a different last name, as long as their offer is agreed to by your bank, that should work.

Best of luck. If you need help with the short sale aspect of things, please let me know.

Marty Kaiser
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0 votes
Dallas Texas, Agent, Dallas, TN
Mon Jul 27, 2009
Have you approached the lender for short sale have family or friend purchase, or rework your loan till home increases in value the sale property. Banks truly don't want your home open work with family.

FYI ~ not all homes which are foreclosed on are placed on market for general public purchase some can be sold thru investor pool are you willing risk all this.

Your thoughts are GREAT however ask yourself if family member or friend purchased your home are they willing risk leasing back to you since did not make payments to bank.

Many concerns consider

GOOD LUCK sorry to read about this.

National Featured Realtor and Consultant, Mortgage Loan Officer, Credit Repair Lecturer
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0 votes
Fraud?!? HA! SCREW THEM!!! The 4 major banks in this country have this unsustainable and horribly designed monetary system stacked against us from the start. And Carlos, screw the FICA, I'll take a 200k in savings on the house (actually more like 600k because of the lack of interest for 30 years) over my credit score. And to the question of where does the money come from? It comes from the missed mortgage payments that get saved for said purchase in foreclosure. Just have a friend (THAT YOU TRUST) purchase the home and leave it in their damn name for a few years. To save 200/600k and own your house free and clear, yes 7 or even 10 years of crappy credit is totally worth NOT having to pay the banks for 30 years. I did something similar with all of my credit cards and got off with about 29% of what I owed. Its all an illusion anyway. Screw em, this entire system is screwed up and absolutely retarded. So plan carefully and find every loop hole possible. Honor, moral, upstanding HA!
Flag Thu Mar 10, 2016
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