Lease back to troubled h/o - Posted by Bill {V.F.}

Posted by rayrick on April 08, 1999 at 07:58:32:

Dan, you were the “someone” to whom I was referring! lol

-Ray

Lease back to troubled h/o - Posted by Bill {V.F.}

Posted by Bill {V.F.} on April 07, 1999 at 11:06:43:

Has anyone had any experience (good or bad) in the area of assisting a financially destressed homeowner by curing his/her default, getting a deed to the property and leasing the property back to the h/o for a specified period of time with the h/o’s option to repurchase at the end?

This seems like a good way of going about helping someone while at the same time making some money. BUT, just how would it work? If someone out there who is doing it or who has done it could lay out an example, I would surely appreciate it.

Thanks

Re: Lease back to troubled h/o - Posted by Bill Gatten

Posted by Bill Gatten on April 07, 1999 at 22:43:10:

Take Bill Bronchik’s advice… it’s excellent!

Where were you when I needed you, Bill?

I tried a similar scenario to this once, about 12 years ago. But mine was with an Equity Share arrangement. I ended up with my money gone, my tail between my legs, and Mrs. Georgianna Falconi’s fat attorney grinning at me with that snaggly lawyer “I’m gonna eat and only partially digest you” smirk, and a claw out for more money.

I ended up settling for a portion of what I had donated a year earlier, just to save the cost of my defense. It was a suit I would probably have lost anyway, and one which–even if I’d won–wouldn’t have yielded enough for legal fees (and which would have taken me away from all the other widows and orphans I was trying to defraud).

One of the problems was that my deed had been taken in advance, and would likely have been considered by the court to be a forfeiture under duress.

When Ms. Poor, Sobbing Down-Hearted Mooch-Falconi first came to me, she was scheduled for Auction at 10:00AM the very next day, and needed $10,000 pronto to save her home. Without so much as a question as to her tatoo, her prison record or why she was pushing a shopping cart down the sidewalk, I had her execute the Equity Share Agreement and the Deed (which was not to become effective for another year). I then sent my son to her bank with a cashier’s check for the full amount needed.

I ended up saving the lady’s home, all of her equity in it and her tax write off. All I ever wanted out of the deal was for her to either repay the $10,000 with 15% interest after one year, or (if she couldn’t afford to) allow me to execute the Equity Share Agreement that named me as a 50:50 investor at all over the Mutually Agreed Value at the time (she would have given up no begining equity). She cried and hugged me and pronounced some kind of Catholic thing over me; and swore I had been sent to her from Heaven by the Real Estate angel (St. Ralph, I think she said it was).

Well… it seems that at year’s end, her lawyer explained to her that since the deed had been taken under duress, and had not been recorded yet; and since the property had gone up about $80K in the meantime, and since she didn’t have the $11,500 anyway–she needn’t share anything with anybody. And furthermore, I was, he said, a slime-ball bottom feeder looking to steal her house from her. He then convinced her that she’d be better off selling him the house (at $80,000 under market, I’m sure) and moving into a quiet little condo somewhere.

And besides, my own attorney felt that under the circumstances, since the appreciation had been so great (lucky me), the courts would probably see me has having counted on her not being able to pay (knowing she was destitute, starving and covered with sores) when she entered the agreement.

If I’d just made her a loan, and not tried to get cute, I’da been fine, and could have bought her house from her in a year. But, Oh Nooooo! Gotta be creative and go for the big bucks (hoping they can’t exercise that option when the time comes–as it were)!

Bill

Re: Lease back to troubled h/o - Posted by Ryan

Posted by Ryan on April 07, 1999 at 21:19:02:

Joe Kaiser’s “Totally Dominate Your Foreclosure Marketplace” course has a solution to this.

Re: Lease back to troubled h/o - Posted by Bill {V.F.}

Posted by Bill {V.F.} on April 07, 1999 at 15:02:01:

Ray and Bill…Thanks for the information

Re: Lease back to troubled h/o - Posted by rayrick

Posted by rayrick on April 07, 1999 at 11:46:53:

Bill’s articles on this subject are pretty comprehensive. I would add one thing. One factor that could help the seller’s case if they were to try to recharacterize the lease-back as a loan is if they claim that they were in duress at the time of the agreement and that you took advantage of them when they were down. I know of someone who does this sort of arrangement and makes it a REQUIREMENT that the homeowners get legal counsel before entering into the agreement. This sort of difuses the “that sly devil took advantage of us” argument before it can start.

-Ray

Re: Lease back to troubled h/o - Posted by Bronchick

Posted by Bronchick on April 07, 1999 at 11:12:49:

Read the article on my site called “Can Foreclosure Investing Be Criminal”?

The best solution, I think, is this… - Posted by Daniel Lubell

Posted by Daniel Lubell on April 07, 1999 at 23:12:00:

I can’t even count how many times I have done similar transactions and I ALWAYS have the seller get an attorney. I would not touch a foreclosure sale lease back without one!
By the way, when the foreclosure seller is motivated to work with you, the attorney is usually an asset to the situation.
Daniel Lubell

Where are the limits? - Posted by Michael Murray

Posted by Michael Murray on April 08, 1999 at 14:39:01:

Hi Bill,
I read your article mentioned above. I have known the basic tenets of “Usury” for most of my life, however, I have never known the legal limits one could charge before stepping over the line. It is different in each state, I suspect. What about Colorado?
Thanks,
Michael Murray