I got a home owner who is in foreclosure but wants to keep the house and do a lease to own option on the house for like a yr…She owes 171k and the house comps at 220k.I was thinking of getting a loan for 190k and paying off the foreclosure and cashing out at least $12000 after closing cost for any expenses which might occur during the one yr lease option…The homeowners mortage payment used to be $1100 a month but i will have to charge her 1400k per month to service my morgate…then after the yr is up sell the house back to her @220k…am i getting myself in a pit here?
<< “…am i getting myself in a pit here?”>>
Let’s see…? She has the house (owns it) for $171K or thereabouts and can’t afford the payments (foreclosure), so you’re going to buy it and charge her $300 more than the payments she couldn’t afford…?
If she couldn’t afford $1100 and just didn’t bother to pay, why do you think she’d pay you $1,400? After a year, what makes you think that someone will lend her $220K if she had a foreclosure at $171K?
Am i making any sense here?
<< …am i getting myself in a pit here?
My opininion – “oh yeah!”
I also think that you’re probably letting yourself get emotionally attached in some way or another to the property, the lady, or both.
My 2 cents!
Keith
Thanks for the reply keith…Here’s the story…The house is under the dad’s name who has health problems(skin cancer)…wellsfargo foreclosed on the dad but not the daughter…she’s self employed and her credit sucks(520 mid score 460)…if she defaults on the payment she understands that i will have to evict her to sell the house…
first off, if you are in Calif, I am pretty sure your proposed deal would be illegal under Calif Code 1695. What you are proposing is form of fianacing; not an arm’s length transaction.
second, if the current owner can’t keep payment current at $1100, how are they going to do it at $1400/mn???
third, most of the foreclosure pros I know (which I am not), say you need to get the former owner out of the house. Otherwise, they will dig themselves further into what would be now your property and it can turn into a nightmare.
also, you seem to be proposing that you would be paying $0 for the current owner’s $50k in equity. You might want to read the following article and check into your particvular state’s laws before you do that kind of deal. http://www.foreclosureforum.com/articles/0508unconscionable.html