Because there are to many pitfalls and you lack the experience. Many states have laws about buying a home from someone in a foreclosure process. Does NJ have such laws? Even if not you could be in trouble if the courts construed that money and abscounded equity as a loan and usurious interest.
As an instance, in Texas usuary laws say that if you charge usurious interest the whole loan does not have to be repaid. We also have a home lending law that if applied you could never get them out.
Your best bet is to pick out a friendly attorney and discuss this type transaction. You may find another NJ investor that knows or think he knows(until the court decides otherwise.) But then you could do it and every thing turn out okay.
The sellers have a house that has a 1st of $34K behind 1 payment, a 2nd of $78k behind 5 payments and received a foreclosure complaint(for the 2nd) that is on hold while they fill out hardship papers and a home improvement loan of 14k that is 8 months behind (they actually threatened the sellers with bodily harm). The house is in great condition and is worth about 180k. 126k is owed so that leaves it with about 54k equity.
They are willing to deed us the house if we catch them up on the payments and let them rent back the house to them. Their payments would be about $1400/ month.
We are thinking of putting the property in a land trust with the sellers as beneficiary and then having them assign me as the beneficiary.We would catch them up on their payments.(Try to get the payments put at the back of the loans).We would like to lease or rent them the house for up to 5 years.
I would like to offer them 140k for the house but hold their equity in case they can’t make their rent payments.
What do we need besides a trust agreement, warranty to trustee, assignment of beneficiary agreement and a rental agreement? Do we need a bill of sale and a contract yet?
And if we do we don’t want to close until they are ready to move on in about 5 years. The purchase would have to be subject to, so we also need a CYA letter. (We already have release of information forms so we can talk to the lenders)
This is only a 2nd deal in less then 3 weeks. We know this works, just a little confused with the paper work.
Also need to get the deceased husband off the deed.
Re: Land trust —Will this work? - Posted by KC Questions
Posted by KC Questions on July 17, 2002 at 01:39:58:
If you decide to go ahead and buy the house after discussing it with your lawyer, my suggestion is for you not to let them stay there. If they couldn’t pay their mortgage payments, which I am sure totaled less than $1400/month, how are they going to pay you that much in rent?
Why do they have to stay in the house? If their reason for wanting to stay there is that they don’t have money to move, why not offer to pay their first months rent and security deposit in an apartment or house across town that they can rent? This will allow you to put some tenants in the house that can actually afford to pay the rent, and would be a small price to pay for $54,000 equity.
I would like to add to Bud’s excellent comments, that if you buy the house and let them stay you can expect them to treat you the way they did everyone else who helped them - if not worse.
I wouldn’t let them stay. In fact if we made a deal I wouldn’t give them any money until they were completely moved out no matter what they said.