Posted by Brent_IL on September 17, 2003 at 23:58:04:
Here are some quick thoughts.
1 - Win-Win is all right when the risk is equal. In this case, you are taking all of the risk because he has nothing to lose. That brings up #
2 - No one in bankruptcy wants to lose equity, but they don’t want to give up payment free living to stop the erosion of their equity. But this makes me wonder
3 - if he has any equity. If he is already at the foreclosure sale he has interest, penalties, bank charges, and legal fees, on top of the loans. You have transaction costs and other expenses to unlock what’s left.
4 - Forget the lease-back. I’d venture a guess that less than 1% work out. Virtually everyone I’ve ever heard of that tries this to be nice ends up in court a year later. If he can’t make the mortgage payments, how will he pay sufficient rent to cover the payments and the expense of running the property if you own it? I would not give him a dime until he is out of there.
5 - In all probability the lenders will move for a relief of stay anyway.
I’d verify the comps, but you might consider keeping in touch with him and purchasing his redemption rights after the sale. It just seems less problematic considering that he knew enough to file a bankruptcy petition to stall the proceedings.