Posted by Brad on June 01, 2005 at 08:34:33:
Be careful cuz it seems a bit fishy. I mean if the current owners’ scores are too low to do a cash out refi now, can they really improve their score A LOT in 6-24 months? Also, if you do this make sure to take steps to protect your option (ie performance mortgage and deeds in escrow). This way you won’t get screwed on the backend by some dumb lawsuit stating that the transaction was actually a disguised loan.
If a judge would rule that this is a disquised loan, your agreement would be null and void and then you’ve got a really nasty battle. Also, this agreement could be usurious (aka loan sharking) and if you do multiples as the post states, you could be charged with usury and a whole bunch of nasty racketeering charges. I’d go over the legalities with a lawyer. Just my opinion but I’d be careful.
interesting proposal - Posted by John
Posted by John on May 31, 2005 at 17:13:33:
I got a call friday from a Mortgage Broker, with an interesting proposal. Here is the scoop
He has a couple people that he is working with that are in over their head for different reasons. They have lots of equity but there score is too low to do a cash out refi. He wants me to buy their property at 65-70% appraised value and then lease option or land contract the property back to seller for 6-24 months at my cost plus a fee of $10-15K. The sellers would pay my payment plus $100 each month til they exercise their option.
Ex the one case FMV=137K Amount owed $51K purchase price $90K My payments $775 PITI Rent payments $875 Will sell back in 24 months@ 105K This arraingment will allow me to make a profit, and seller will keep property and retain some equity.
I can get 100% financing on this by the way. Also I am in a hot market with 20% appreciation per year
I don’t see a problem with this. It appears to be a win for everyone, seller, me, and broker. I have worked with this Broker before and know him pretty well. As long as everything is done thru a title company and a disclosure page is signed, I think it could work.
Any advise from you experienced and creative friends out there. Thanks John