Short Sale with renter idea: Feedback please

I have a friend (all great stories start this way) has a house that is upside down. It is in a very desireable area in arizona.

FMV: 320,000
Mortgage: 650,000

Desired situation:
He will list his house with a RE agent, and quickly go under contract with an investor to negotiate the short sale. He wants an investor to negotiate a short/below FMV deal for his house (given his lack of credit worthiness due to very poor REI management in 2005-2008, i think someone will be able to get this house for 300,000 1/2 acre lot in PV). He will live in the house and lease to own with a purchase contract for a negotiated amount for re-purchase in 24 months. He will come to the table in 24 mo with no less than 50K, cash, hopefully with a seller financed deal in 24 months.

End goal is for him to get out from under the drastic negative equity while keeping his house, forever.

Is this a doable deal? realistic? or me just dreaming… thanks!
I am eager to join this community. Thanks for all your info.


AZ Wishing Well what your friend proposes to do is illegal!!!

In any state it is against state and federal law to scheme to defraud a lender by selling and leasing / buying back your own property.

Any way you cut it your friend won’t be living in or buying that house if he’s smart, and Caviot Emptor, let the buyer beware as any investor who schemes with your friend to do this will be sharing a prison cell together and wondering where things went wrong???

So the way the real story goes is your friends moving!!!


I did not think it was illegal. So for that thank you.
I guess that is what I thought a lot of investors that “help stop the forclosure process” do, and it was a good situtation to have the homeowner/renter stay. so…i willl tell him this is not an option.

Any short sale situation required arms length transactions. The investor would be seen as a straw buyer and everybody gets to go to jail.

Gotcha. I guess I saw “arms length” as personal connection.
I hear you loud and clear. Illegal. :slight_smile:
Still learning and have a long way to go.

Thanks again…

Here is a pretty nice definition…

Not only illegal, but no smart investor would buy a short sale and leave the prior owner in the house. Sorry, but your friend is already a proven scammer and cheat with a history of not paying back money that he borrows. So why on earth would I do a seller financed deal for him? I already know he wont pay me what he owes me if he ever feels it is inconvenient.

Suggest to you friend that he get rid of his house, and go and rent a cheap apartment while he saves up a down payment and fixes his credit. Then, in 3 years, he can take his $50,000 and use it as a down payment to buy a new house.

If he believes that he deserves to live in a $600,000 house, he should just finish paying for the one he bought and live there.

Solutions are available if you know where to look for them. Would like to help.