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I submit an offer on a short sale property. The owner require to rent back to them after the closing for 2 year as contengency to accept the contract. Any suggession? It is a very good deal through.
It's likely the seller's bank will require a document to be signed verifying that the transaction is arms length. It may include a prohibition to leasing back.
You should review with the seller regarding this possibility, and possibly consult with an attorney.
Yep, highly unlikely it would be approved because of the Arms Lenght Affidavit that most likely will prohibit a rent/lease back to the seller. I;m surpised the Real Estate Agent didn't flag this from the get go
Aside from the arms-length situation, someone who couldn't keep their house doesn't strike me as a good bet for a tenant. Tell 'em to get stuffed.
what if that same homeowner who's doing the short sale is on an ARM that adjusts every 6 months and the payments keep going higher and higher but if they were to rent, they could be paying half their normal payment? Would you tell them to "get stuffed" if this were the scenario or are you just the kind of person who judges others without knowing absolutely anything about their situation?
oh it's quite possible Debsi, interest rates can't go any lower than they are now and will only go up from this point forward.
Somebody with in foreclosure/short sale right now, with an ARM currently in the adjustment stage is getting a lower payment. Sure, in the future, people with ARMS will face payments that increase. If you want to buy their house then and rent it back to them, it's fine with me.
If the banks were allowing this, everyone would be find an investor to hook them up. Here is how it would work.
Let's make a fictitious "my house" oh, and assume everyone is 100% financing just for simple numbers. Say I bought "my house" in 2005, in the peak of the market for $400,000 at an interest rate of 5%. Today it is worth $250,000. My Principal and interest payment is about $2150. When you include taxes & insurance, maybe $2600 or so. (These numbers are all made up, so are for example only)
Since my house is only worth $250k now, I get my fictitious friend Bob (who is no relation to me, just someone I know with money) to buy my house from the bank short sale for $250,000. He can get an interest rate today, even on a non-owner occupied loan, of around 4.5% or less, so his P&I payment is only $1270.
So he can then rent the house to me for say $1800 a month (to cover taxes and insurance and get some return on his money), I'll buy it back when I can qualify, perhaps at a slightly higher amount, say $275k. I save $800/month, take a ding on my credit for a few years, but don't have to move out, and when I buy the house back, my payments are substantially lower than when I started because I got the bank to write off a substantial amount of my mortgage. In the meantime, Bob gets a great return on his money for 2 years. Everyone wins except the bank. That's why the banks don't allow this.
I submit an offer on a short sale property. The owner require to rent back to them after the closing for 2 year as contengency to accept the contract. Any suggession? It is a very good deal through.
It isn't a good deal because they're DEMANDING to be your tenants. Do you want tenants with an attitude problem? Sooner or later, they'll do the math and realize that your payment is $XX and you're charging them $XX (more? double? triple your payment? You have to make a profit, so your payment is going to be less than theirs).
Then you'll be the "evil opportunistic landlord who STOLE their house".
Seriously, if you want a small idea of how bad it can get, hang out in the renting forum for a day or three.
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