what would you do?

I am a Realtor. I do seconds on properties and refer some to friends when I’m invested.

One such friend is in foreclosure. He has cured the second and is 18 days from filing for sale.

He would like to have the property as there is about 100k equity after foreclosure.

He has asked me to go in with him as he feels more cash needs to come into play.

What I’m thinking is to approach the owner with an offer to cash her out and let her stay as a tenant.

What I’m looking for is alternative ideas and also how best to structure the partnership with my friend?

Land trust in a limited partnership?

Anyway any suggestions would be very much appreciated.


Okay, it’s alittle confusing on exactly what is happening, but it sounds like that you’ve a friend that has found a property that is in what is called “pre-foreclosure” but he needs your cash to close the deal. I’ll respond assuming this premise.

You probably already know this, but for those that don’t, here goes. Since you are a RE agent, you must disclose this fact to the seller BEFORE you make any offers to her. Also, most state laws governing RE agents require that you inform the seller of your professional opinion of price, even if you are the buyer. Of course, this may make it a bit harder to convince her if you have to say that she has $100k in equity (though it shouldn’t be).

As to the offer, get it for the best price possible, but don’t, I repeat, DON’T, leave the owner in the property as a tenant. The short answer/reason is that it is simply too much risk for too little reward. There are a ton, heck, two tons, worth of possible negative legal outcomes to that situation to ever make it worthwhile. If the owner/tenant is elderly (even middle-aged) multiply legal problems times ten. Besides, if they couldn’t pay their house payments, what makes you think that they’ll pay you?

As far as how to setup, it would be best for you to speak with a local, preferrably referred, attorney on that. Generally speaking, however, partnerships are bad. You become responsible for ALL of your partners debts, good and bad, and he, yours. If he gets sued, they could come after your stuff even if you didn’t have anything to do with the lawsuit in the first place.

I’d recommend forming a LLC and have it taxed as a partnership, but again, the best advice here would come from your tax professional.


Thanks Raj,

I fully intend to disclose my status and opinion of value and will have her sign such.

We would give her a fair offer from our perspective.

I feel that it would be a win/win situation as her alternatives are pretty limited with 18 days left.

I believe a limited partnership would solve the problem of liability from the partnership wouldn’t it?

As far as having her for a tenant I understand your comments about payment.

I was thinking about structuring a prepaid rent agreement in the buyout deal. That way we wouldn’t have to worry about payments.

I do understand the sympathy someone like that could generate but hopefully with extraordinary disclosure that could be avoided.

I appreciate your comments and any others pro and con from others.