looking for a lease to buy option or situation where homeowner is close to foreclosure. can bring mortgage current and rent and work out equity?

Asked by Nodebt, Point Loma Heights, San Diego, CA Tue Sep 13, 2011

Help the community by answering this question:

+ web reference
Web reference:

Answers

7
Dp2’s answer
Dp2, , Virginia
Wed Sep 14, 2011
Actually, several investors (myself included) work with sellers in this situation nationwide--even in cases where there might be some negative equity. In cases where the seller is extremely underwater (has more than 10% negative equity [my criteria]), we might structure the deals using other exit strategies (namely short-sales, short-paper, DIL, or private workouts).

Agents/brokers can--and do--get paid when helping to facilitate a properly structured lease-option. Wendy Patton, Phill Grove, and countless others have plenty of materials both online and offline that explain how to do it. One may also discuss this with an experienced real-estate attorney.

The reason why doing a lease-option might make sense--even in cases where the seller has little/no equity or some negative equity--is that given a long enough option period, the market value of the subject property eventually will appreciate to a point where its appraisal will support that valuation. That's definitely going to happen due to inflation and the continually rising costs of living. While this might sound like a speculative play, it's not. This is primarily a cash-flow play, with a possible equity spread kicker, and a downside hedge (the option).

If the property doesn't appraise for the strike price, then the tenant/buyer doesn't have to exercise the option. Yet, if the landlord/seller and tenant/buyer are happy with the arrangement, then they could arrange to extend the lease and the option to give themselves enough time for the real-estate cycle to catch up to where they need to be.

This play is tried and true. It's been used effectively during several of the other previous down cycles; some of us are using it now too.
1 vote
Maureen Bye…, Agent, Oceanside, CA
Wed Sep 14, 2011
Cory, As a fellow Realtor you chose to inappropriately dis-credit me on a public forum when U have no idea what my experiences are! I've been in the real estate industry as a designated broker, brokerage owner, investor and landlord for almost 40 years, and I find your answer extremely offensive. YOUR COMMENT gives a poor image of our industry to the public.
Web Reference:  http://www.coastal.biz
1 vote
BXT AXT, Agent, San Diego, CA
Tue Sep 13, 2011
If someone is close to foreclosure they are more likely to have negative equity in the home. So why do you want to make mortgage payments on a bad investment? Below is a link on leases with the option to buy I recommend reading.
1 vote
Cory La Scala, Agent, San Diego, CA
Wed Sep 14, 2011
Please heed the first three answers. Many agents write in here saying they do whatever transaction is in the question
0 votes
Maureen Bye…, Agent, Oceanside, CA
Wed Sep 14, 2011
Hi, I'm happy to know that ur trying to purchase realty with your current financial situation whether its a pre-foreclosure, lease/option, lease/purchase... All of these transactions can be fully executed properly between the parties with an experienced buyers' agent assistance. Call or email Maureen at 760 622 6855 or maureen@bellrealtygroup.com and lets get creative!!
Web Reference:  http://www.coastal.biz
0 votes
Jim Fishinger, Agent, Carlsbad, CA
Wed Sep 14, 2011
Both of the answers below make valid points. I have put together lease options and contracts for deed before, but in most instances they are problematic. A seller looking to do such a transaction will usually be seeking a premium for the terms offered. That means you will likely be paying too much and hoping for a market bounce. While that will happen eventually, I think the timing on it is uncertain. A motivated or desperate seller with equity is more likely to price aggressively and move on. It would help to know your situation and the reason you are exploring this option as there may be another alternative. You will likely need flexibility in where and what you buy to find such a deal .
Jim Fishinger
Broker Associate
Excel Properties
760-518-3994
Web Reference:  http://www.jimfishinger.com
0 votes
Cameron Novak, Agent, Corona, CA
Tue Sep 13, 2011
Not likely that this situation will work out. Focus on a different goal with a higher percentage chance to succeed.

Most owners know the market is at or near the bottom and wouldn't be willing to part with equity moving forward.

Good luck,

Cameron
Corona Short Sale Agent
Corona, California
0 votes
Search Advice
Search
Ask our community a question

Email me when…

Learn more