Re: Possible deal, best option? - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on August 30, 2003 at 12:49:31:
This is not a motivated seller. He wants too much.
I strongly advise you against any structure that promises the current owner that s/he can become an owner of the property again in the future. You definately should consult with an attorney in your area who is very knowledgeable about foreclosures and the case law related to them. I don’t know your local law.
My advice is based on what can happen here in CA. Here, if you structure the deal with the former owner having a chance to reacquire the property there is the probability, should you end up in court, that the judge would see this as being a loan, with the deed to you being treated as a “hidden security instrument” rather than a real sale. If that is so, the terms of the loan have to comply with the state usury laws which limit how much interest can be charged on a loan. If the interest is too high, the judge can knock down the interest paid to the legal level, can eliminate all interest, so you get none, or, I believe, even declare that you forfeit the money that you loaned. And, if you have agreed to buy and resell to the former owner, you probably have a large profit built in. That being so, you certainly will be violating the usury limits.
Your state laws may be different. But you need to know that before you do anything like that.
Are there any MI laws similar to our CA “home equity sales statute?” This is a law which restricts dealing with property occupant-owners who are in foreclosure. It has a lot of restrictions which most people would not think of and which could cause extreme financial distress for the buyer should there be a court case involving the sale. Again, if you don’t know about any parallel laws in MI, you need to consult with an attorney. Same for our “foreclosure consultants” law. Is there anything like that in MI?
Virtually every person in foreclosure wants to keep the house. That is a given. It just is not reasonable, at least for the investor who is going to help the owner. Joe Kaiser has a technique which he uses involving taking a partial ownership, but only when there is very high equity to value ratio, which is not the case here.
If you don’t know the laws about forelcosure in MI, I’d recomend you either get out of the preforeclosure arena, learn the laws, or start consulting with a very good attroney.
Preforeclosures are not a good place for beginners to start, in my opinion.
Good InvestingRon Starr