Why do these guys do sale-leasebacks? - Posted by Marc Donovan

Posted by Kevin - WA on May 14, 2006 at 22:17:55:

Marc,

I had to re-read my post to figure out why you thought I would be sympathetic to someone who did not pay their rent - whether they used to own the property or not. I was unable to do so.

You have misread my position on this issue. That is one of the problems with bulletin board postings and email, as opposed to a face-to-face conversation. A failure to communicate has occured.

But, I stand by my comments. Specifically, in the article there was the lady who said that the guy told her “he would not record the Quit Claim Deed” but he did it anyway. Sure, she could be lying - but I subscribe to the “where there is smoke, there is fire” theory. I think that the reason that these guys have so many angry “clients” in their wake is that they were not being honest with people. Maybe I am wrong, but that is what I think. And, certainly the woman should not have signed the QCD if she did not want to transfer ownership - they are both at fault.

Again, though - if someone does not pay their rent, they will get no sympathy from me as a juror. Ask my tenants.

K

Why do these guys do sale-leasebacks? - Posted by Marc Donovan

Posted by Marc Donovan on May 14, 2006 at 08:55:53:

http://www.sptimes.com/2006/05/13/Tampabay/Sale__or_foregone_for.shtml

Its just plain stupid and it makes us all look bad. It forces legislatures to write these forclosure bailout laws that affect everyone in the investing business.

Re: Why? - Posted by Jim FL

Posted by Jim FL on May 15, 2006 at 16:18:07:

Marc,
I actually personally know one of the victims in this story, and no, won’t say which one.

Sadly, I met them AFTER they fell behind on their mortgage, and deeded the house to these investors.

Because I have talked to them, and looked over their paperwork, I do know in my heart, that these ‘investors’, mislead folks, or at the very least, did not disclose everything very well.

The paperwork involved was, to say it nicely, very amature, and rather convoluted.
They seemed to prey on those who were not extremely literate, and would verbally tell them one thing, with the docs stating another.
I too doubted the fraud claims against the investors, at first when I heard about the story locally.
Simply based on my own experience with multitudes of pre-foreclosure sellers who had problems solved, were grateful, and once solved, seem to feel cheated when they learned the end investor made a profit.

That was certainly not the case with my friend who deeded their home to these ‘investors’.

Bottom line, new legislation is not needed, but, it probably will happen somewhere down the road, as it has in other states.
I’m not worried much, as long as whatever is drafted is watched closely, and written well.
Just don’t allow sellers to remain in the house, and you’ll be fine.

I’ll even admit, I’ve been frustrated with these types of investors myself, when I meet sellers who have called more than one advertisement…and heard before me, “sure, we’ll stop your foreclosure, and you can remain in the house, and buy it back later, also, here is some cash now to help you sign…er, I mean, start over your house/life.”

I even got to the point where I’ll tell sellers, straight out, “yes, I will buy your house, solve the problems related to it, BUT, YOU MUST MOVE OUT…and here is why?..”

Then explain to them, sure, some folks very well might, or perhaps already have, offered to help you, and allow you to remain.
the thing is, I know this fails, 99% of the time, and I’m here to solve your problem, not help you create more so I can profit.

Anyway, these guys did make promises, knowing ahead of time the sellers would ultimately fail, or at least, should have known, and for that reason, should be stopped.
The only reason it gives all investors a bad name, is because its covered by reporters who’d rather tell you “there are 300 investors in the tampa area offering foreclosure relief”…than, out of the 300 active pre-foreclosure investors in Tampa area, there are a few/small percentage, that prey on people"

Which one makes a better headline?

We’ll always have to deal with scum mucking up the water in our investing world, but as long as you perform, and act ethically, and smart, things will be fine.

Just my two cents, keep the change,
Jim FL

P.S. I personally, will not buy a house and allow the seller to remain in it, period.
Now, I have bought occupied rentals, but that is different.

Sale-leasebacks - Posted by Natalie-VA

Posted by Natalie-VA on May 15, 2006 at 08:33:24:

There are a lot of sale/leaseback/options going on in my area. It’s nearly impossible to compete with “investors” who are telling desperate people exactly what they want to hear.

It may or may not be fraud, but it is just plain wrong.

Desperate people will do desperate things. The bottom line is the the investor is setting the person in foreclosure up for more failure. If someone really fixed their situation and was ready to get back on track, they could work out a deal with their lender without having to deal with an investor. The investor who is really trying to help that person would tell them that.

I wish some of the ones in my area would end up in court. It’s not going to stop until some of these guys learn their lesson.

The only time I ever rented back was when I found a military family that got behind and couldn’t afford to catch up. They were being transferred out of the area in 8 months. We bought their house and held enough of their proceeds in escrow to pay their rent for the next 8 months. They were thrilled. There was no option to buy the house back. That’s right, they had sales proceeds. We didn’t just take over their payments, we made a deal with them that worked for both of us, not just us.

We’re working with another lady right now who is in bankruptcy. All those “investors” that knocked on her door wouldn’t help her since she was in BR. We are buying her house and she will have to leave. There is no leaseback or option. She will walk away with her BR being paid off and thousands of dollars to start over. She is thrilled. I guess those “investors” couldn’t figure out how to do that.

This stuff really irks me if you can’t tell.

–Natalie

Re: Why do these guys do sale-leasebacks? - Posted by Kevin - WA

Posted by Kevin - WA on May 14, 2006 at 13:07:33:

I don’t see the problem specifically as the “lease-back,” the problem is the fraud. The seller is at fault for signing documents that they don’t understand, and the buyer is at fault for deception.

I know of local companies who have done lease backs in certain situations. Specifically, the problem causing the foreclosure (for example, loss of job - but now have a new job) was solved and the person can now afford the payment. Also, it is hard to say “I didn’t know I was selling my house” because they go through a traditional purchase. They have to sit at escrow and sign the deed over. They also sign a transaction summary indicating the exact terms, they are SELLING their house, etc.

I think that it is pretty risky to do a kitchen-table closing in this situation so I would not recommend it.

I don’t believe that everyone is a candidate for a lease-back, but in situations where the person has a chance to succeed it can work. I think that it is also important to have in writing what will happen in the case of default - and have a signed notarized acknowledgment of that.

Kevin

Re: Why do these guys do sale-leasebacks? - Posted by Mark (SDCA)

Posted by Mark (SDCA) on May 14, 2006 at 12:38:53:

The “investors” may be unscrupulous but the owners are just plain stupid.

“I can’t make my mortgage payment of 316 but I can and WILL make my rent payment of 461.”

That is called denial. It’s also called stupidity.

Mark

Re: Why do these guys do sale-leasebacks? - Posted by Marc Donovan

Posted by Marc Donovan on May 14, 2006 at 20:32:54:

Your reaction is very similar to the average American and this illustrates the problem very well. The politicians are serving the wishes of people like yourself who are reading their daily newspapers.

Where you are wrong is the fraud on the part of the buyer. Im sure it happens, but it is rare. Most of these guys are really trying to make a buck helping these people out. Think about it - what’s the difference if I lease-back or I tell the home owner to hit the bricks? Hit the bricks means the homeowner will go down the street rent a place, get behind on rent, and get evicted. At that point you and 90% of your friends and neighbors would call them deadbeats. On the other hand, if I buy their house and let them stay there as tenants, they get behind on the rent, I evict, and you and your friends and neighbors now call them victims. The truth is it would be much better for the homeowner if I let them stay, but I don’t dare do that because I can see them inviting you to their jury trial asking you if I am defrauding them.

I doubt the fraud allegation on most of these. How can a homeowner sign a lease and claim they were duped. How often do you sign a lease on your own house?

I buy subject-to houses and I always explain everything up-front, in simple terms, but the story changes when the attorneys get involved - and its always a bogus shakedown - at least with my experience.