Posted by Barry (FL) on June 16, 2007 at 09:12:00:
I think you’ll find the RE lobby also threw a few bucks at this legislation. The RE lobby want to have a protected market where everyone involved in an RE transaction has to use a realtor.
Sale - Lease Backs…Problems? - Posted by tsiegal
Posted by tsiegal on June 14, 2007 at 17:03:04:
What kind of problems can occur when you do a Lease-Option?
Ex. You purchase a property from someone who’s in foreclosure. You agree to lease it back to them with an option to purchase it at a future date at an agreed upon price.
What are the legal ramifications of doing a sale Lease Option Buy-Back?
How would you avoid any legal problems?
Thanks in Advance!
Re: Sale - Lease Backs…Problems? - Posted by Bill Jacobsen
Posted by Bill Jacobsen on June 15, 2007 at 09:41:53:
I invest in Oregon and got into the business buying pre-foreclosures (usually short-sales) and lease-optioning back to the previous owner. It is about half of my business now.
While it is legal here there are some things to be aware of. If you obtain a loan on the property the bank can invoke the due-on sale clause. I have only taken out one loan to buy a pre-foreclosure but have obtained HELOC’s after the L/O was in place so this is not really a problem for me.
During an eviction process, if the court discovers that there is an option they may require a foreclosure process to get the person out of the house. This is more complicated. Even though only about 1/2 of my L/O are sucessful(lessee ultimately buys property) I have not had this problem.
So there are risks to L/O but that is why you can make excess return on your money with this technique.
Bill
Problems? - Not legal in California! - Posted by Terry Vaughan
Posted by Terry Vaughan on June 15, 2007 at 24:02:06:
We stopped doing this type of deal back in the late 70’s when people sued to collect equity their rent had purchased for the investor. The courts agreed!
Since then, ALL SELLERS MUST MOVE OUT, or don’t do the deal!
Too many other ways to make money - Like the others say, rework the deal another way.
So what are the legal ramifications? - Posted by tsiegal
Posted by tsiegal on June 14, 2007 at 21:06:10:
So what are the legal ramifications?
Re: Sale - Lease Backs…Problems? - Posted by Sailor
Posted by Sailor on June 14, 2007 at 20:16:20:
There are lots of sad tales in the Archives. I would not, under any circumstance, let a seller stay in the property. They w/always think they still own it, & all their friends w/tell them they got ripped off.
I did pre-foreclosures in CA back in the 80’s, but always had the seller move. I only worked w/folks who wanted a fresh start someplace else.
Tye
Re: Sale - Lease Backs…Problems? - Posted by JT-IN
Posted by JT-IN on June 14, 2007 at 19:08:57:
What state are you operating in…? The answer will vary considerably from state to state. In the wrong state, these deals can be a criminal offense.
The real answer lies in how shrewd you are as a business person in being able to read the situation. How likely is it that your prospective Tenant is going to end up filing suit against you. There are usually GLARING SIGNS, in advance, but many people don’t recognize them. Of course if you are in a state that finds legal fault with the structure of this type of deal, then you must leave them alone.
I guess I would say this… if you have to ask the question here, or in a similar forum… then I would question that you have the business seasoning to control these type of deals. This is not a person slight to you but simply a statement that is based on lots of experience with these type of situations, and knowing which ones to say, “sorry Mr homeowner, I can’t help you on this one”. And say that when there is a 40K or 50K paycheck staring you right in the eye.
I wouldn’t have been any good as “Adam in the garden of Eden”, but I can pass on the temptation of doing the wrong foreclosure deal… and it comes with experience to know the difference in the good ones from the problems situations. Not to say that I couldn’t experience my first, but not so far.
I don’t make it a practice of doing these kind of deals, just the ones that have a great fit. Maybe a couple or so a year.
JT-IN
Re: Sale - Lease Backs…Problems? - Posted by IB (NJ)
Posted by IB (NJ) on June 14, 2007 at 18:06:37:
In NJ and many other states legislation is being drafted to stop this practice (NY’s legislation is already in effect). If there is any seller’s remorse whatsoever, that is if the seller someohow is not able to repurchase their property at a “fair price” and cry foul, you certainly stand to lose in court.
Best way to avoid legal problems is to not cause any. Leave these types of deals alone.
My humble opinion.
Ib
Re: Problems? - Not legal in California! - Posted by tsiegal
Posted by tsiegal on June 15, 2007 at 05:14:07:
Thanks Terry,
Interesting enough, I just spoke with a young man who works in Orange County as a Mortgage Broker. His company is working in conjunction with Investors and an attorney. The investor purchases the property from people in foreclosure and agree to sell it back to them. As was mentioned…there are all kinds of legal problems that can arise from this type of transaction.
thanks!
Re: Sale - Lease Backs…Problems? - Posted by tsiegal
Posted by tsiegal on June 14, 2007 at 21:05:09:
Thanks Sailor…i get the feeling your correct in this protocal.
Re: Sale - Lease Backs…Problems? - Posted by tsiegal
Posted by tsiegal on June 14, 2007 at 21:01:50:
Thanks JT,
I am in Florida…and i hear horror stories about sellers (after they get their feet on sure footing)finding a Lawyer and sueing. They make up some bogus claim that they got taken advantage of, etc.
It seems to me that if everything is legal…what are the Courts doing in trying to reverse a business deal and decision?
Re: Sale - Lease Backs…Problems? - Posted by tsiegal
Posted by tsiegal on June 14, 2007 at 21:03:57:
Thanks Ib,
Fair price?
What’s that?
That an interpretation of what the Courts say you should make. Yep…i am starting to feel un-easy about these deals too. Yet, i know they are being promoted and done everyday.
FL HB 65, effective date July 1, 2006 - Posted by JT-IN
Posted by JT-IN on June 15, 2007 at 06:18:27:
TS:
FL passed a law in 06 that regulates several actions relative to dealing with homeowners in foreclosure. The long and the short of this is that there is a civil penalty of 25K for each violation of the law… Any action determined to be in violation of HB 65 would surely have multiple infractions, so the practical penalty would be 50-100K for crossing the line, in the states opinion. I do believe that they are looking for folks to make examples of, which create headlines, and in turn may go a long way toward quelling the practice of dealing with homeowners in foreclosure.
There are a number of aspects that the law regulates, overage at sale is one, but that has been largely taken care of by the drop in values, so there are few overbids being claimed by investors, not on title at the time of the LP filing. The other aspect is foreclosure rescue, and purchasing from one who has had a suit filed, whether you lease-back to them or not. Essentially it boils down to paying FMV. I think if you are buying from someone and do not have a appraisal, you are foolish…
“provides a civil penalty for knowingly using unfair or deceptive homeowner victimization methods, acts, or practices in residential foreclosure proceedings;”
What are unfair and deceptive practices…? That is for the state to decide. Guess who they will side with…?
Review FL HB 65. Make certain that you are conversant with the law and know where and how not to run afoul of the legislation. You can read about it at the link below:
http://election.dos.state.fl.us/laws/06laws/ch_2006-175.pdf
Good luck.
JT-IN
PS. FL is not my main mkt, but I do invest there. I am not 100% up to speed on HB 65, but would tip-toe lightly dealing with owners in fc; as it is an explosion waiting to happen, IMO.
Re: Problems? - Not legal in California! - Posted by tsiegal
Posted by tsiegal on June 15, 2007 at 05:21:15:
BTW…is this illegal in CA?
FL has a new law on this - Posted by Marc Donovan
Posted by Marc Donovan on June 16, 2007 at 05:30:05:
but not much case law yet, so it will be up to the jury to decide.
But we need test cases to see what the end result will be, so go ahead and do it. 
Re: FL HB 65, effective date July 1, 2006 - Posted by BigV
Posted by BigV on June 15, 2007 at 13:00:12:
I think that the state wants to prevent the seller from being taken to the cleaners…
I think (and I’m not an atterney, nor am I in FL, nor am I experienced, so it does not matter what I think, BUT…) that if one buys a property giving the sellers at least half of what they would make, then it will be hard to the state to argue unfair advantage.
For example, if the house has 60K equity and you give the seller 30K, it will be hard to argue that you took advantage. If however, you give a seller $10, then guess who the court is siding with?
one more reason… - Posted by lukeNC
Posted by lukeNC on June 15, 2007 at 09:15:40:
not to deal with homeowners in foreclosure. Go back door or REO.
RE: FL HB 65… - Posted by tsiegal
Posted by tsiegal on June 15, 2007 at 08:33:19:
Thank you JT…i appreciate that.
I read the bill and it looks like it deals with SURPLUS money from a Judical Sale (auctions at the Steps) and Trustee requirements.
I would be interested in learning about the Fines mentioned in your post.
I will look up the HB 65.
Thanks very much!
~T
Re: Problems? - Not legal in California! - Posted by Barry (FL)
Posted by Barry (FL) on June 16, 2007 at 09:14:57:
Legal or not it’s not a good idea, especially considering the courts in CA and the west coast in general. I wouldn’t want to be on the wrong end of an out of control AG.
LOL… somebody has got to go first… n/t - Posted by JT-IN
Posted by JT-IN on June 16, 2007 at 06:30:24:
$