foreclosure alternatives – Buy or Rent My Homes

Foreclosure with Equity?

Published on May 8, 2018 by Buy or Rent My HomesLeave a comment

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It’s hard to imagine in this day and age with the amount of information available on the internet about how homeowners can avoid foreclosure that they still happen. But they do. Although the foreclosure process ends with the possession of the home (the collateral for the mortgage loan) returned back to the bank that is servicing the mortgage, what some people still don’t realize is this: foreclosures with equity can be just as common a foreclosures without. What is a foreclosure with equity? It’s a foreclosure of a home that is worth more than what is owed on the outstanding mortgage. Banks that service the mortgage loan for homeowners will use a Trustee to handle the business of sending notices and ultimately the sale of the property at auction if a mortgage is in default (has not been paid in full and on time). In some cases, a property that is sold above what is owed on the original mortgage+interest+legal fees is classified as an Equity Foreclosure, meaning, the amount over what is owed to the bank is equity, the borrower’s equity. BUT the borrower must makes a demand to the Trustee for the equity portion to be returned! Although the bank does not get to keep this “overage” the borrower must make a demand to receive it. The foreclosing Trustee will almost never make an effort to find the borrower if the borrower is still owed money from the sale of the property. It is very important to understand that a borrower who has equity in their home can still experience a death, divorce, disability, loss of employment or income source or a variety of other “life events” that can cause a borrower to get behind on their payments. If the payments continue to remain unpaid the bank who is servicing the loan can still move to foreclose the home, even if the home has equity. One strategy to avoid foreclosure of a home with equity is the sale lease-back. As a true win-win strategy it allows the borrower to lease back their home from a new buyer with a promise that they will be able to purchase the property back after a certain period of time has passed. After the borrower repairs the financial damage that caused them to get behind on their payments, the borrower (who will temporarily become a tenant) will have the option to purchase the house back in the future at an agreed upon price. The new buyer and the borrower will negotiate how the equity in the property is split before either party enters into the sale of the house and after reviewing the contract with qualified legal counsel. The equity in this scenario is used by the borrower as a bargaining chip with the buyer and in turn offers the opportunity for a buyer to earn a return on dormant cash that might be earning a meager 1% or less in a savings account. In my next article I will discuss ways to avoid foreclosure of homes that have no equity. To your prosperity!

What This Single Mom Did To Keep Her House

Published on March 26, 2017 by Buy or Rent My HomesLeave a comment

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You arrive home tired and exhausted from a long day at work only to find the house is empty and very quiet. An envelope addressed to you is left in the usual place where you usually place your things when you arrive home. Opening the letter you find a one page note:

I’M SORRY BUT I JUST CAN’T HERE ANY LONGER. I’M MOVING BACK HOME TO SORT THINGS OUT. TELL THE KIDS I LOVE THEM.

Can you imagine coming home from a long day at work to this letter?!?! Neither can I!

But for Norah this is exactly what happened. This was a serious problem. The spouse, father and income-contributor of the family had just deserted a family that very much depended on him. Norah had to make some hard choices over the next few weeks. Because she had made the purchased the home she was living in prior to getting married, her primary residence was in her name only. After sorting out her situation Norah had approached my colleague with the idea of selling the house for $375,000. She would then downsize into a less expensive apartment that she and her 2 young children could start over. Norah felt she had enough equity to cover two years of rent but still had sizable monthly bills. One of the largest bills was her automobile loan, a stiff $400/month. Norah still owed $9000.00 on the auto loan so the debt wasn’t going away anytime soon. After learning about Norah’s circumstance my colleague could see she was in a tough position. Not just because of her bills, but because of her life circumstance. Loosing the financial and emotional support of her spouse, uprooting her 2 young children, selling the house, moving into new surroundings and into a new apartment. This would be a lot. My colleague sat down with Norah and looked at her monthly budget. There was no question that she earned a good living, but the auto loan was expensive. Looking deeper into the details my colleague found that Norah had the money to cover the mortgage. She just didn’t have much left over after paying all her bills. To provide a solution she suggested that she would be willing to buy the house from Norah with a 5 year option. As part of her down payment, which would be non-refundable she paid off the car note to the bank. She then originated a promissory note with Norah in which Norah would pay her $137/month for the next 5 years. My colleague agreed to reduced the auto loan by $1000 and then deduct it against the Option purchase price she offered. This would keep the monthly auto payment down. Even better, she told Norah that if during or at the end of the 5 years she wanted to buy out the option from my colleague, she could purchase the house back at a price they would agree to, or a 10% increase whichever was less. They agreed to the deal. Norah had to agree to not miss any payments on auto loan and maintain the property(repairs), taxes and insurance. So what did this accomplish for both parties?

-Norah was able to continue to live in her house and keep the children in the same school district.

-Norah was able to sell her house at $375,000 without hassle by accepting the option.

-For the next 5 years Norah can sort out her financial goals without the pressure of moving and starting all over again.

-Norah will still be paying down her mortgage debt so if she sells the house in 5 years she will still have received 5 years of mortgage interest deductions on her taxes.

-For the next 5 years if Norah’s financial situation improves she may buy out the option and repurchase the house – thus never moving.

-Norah reduced her monthly expenses by refinancing the auto-loan with the Option buyer at a more affordable payment which will leave her with more money in her pocket at the end of the month.

– The buyer’s option guaranteed a minimum of a 10% increase on the purchase price if Norah were to buy out the option. A 32% return on investment after paying $9000 to pay off the original auto loan.

-Even if Norah doesn’t buy out the option she agreed to continue to maintain the property (repairs), pay the mortgage, taxes and insurance so the buyer has zero property management issues to deal with.

Although Norah could have sold her home, this solution gave Norah favorable options in which to stabilize her life circumstances to give her the confidence to face her financial challenges from a position of strength.

Don’t overlook WIN-WIN scenarios. The obvious isn’t always the best solution.

Contact me if your looking for solutions to your housing needs!

buyorrentmyhomes@hotmail.com

The Lease Solution

Published on January 28, 2017 by Buy or Rent My HomesLeave a comment

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In 1992 an up and coming real estate investor/agent found himself over his head in the commercial real estate market — $5 Million in debt! He couldn’t pay back the loans for his commercial real estate projects. At the same time many developers were getting out of commercial real estate because the market was collapsing. Not a single banker would negotiate or restructure his debt. His loans were causing him such a headache he couldn’t pay his bills including his mortgage. He had to downsize immediately! So he put his house on the market before serious trouble ensued. But he didn’t try to sell his house. Instead he recognized that his home had value and if he could find a suitable renter, it would allow him to return to his house after getting his financial situation in order. He consulted several colleagues and determined the best idea was to find a tenant that would pay a full year of rent in advance. This strategy would allow him to keep his house, even though he would have to move out temporarily. He called every realtor he could think of and asked if they could knew of a renter who could make a full years worth of payments — up front. Weeks passed when one morning an associate learned about an athlete who had just retired from sports and was between home purchases. The athlete wanted to take a couple years to make her next buying decision. After walking the property the athlete said “I’ll take it. Would you be ok if I signed a 2 year lease?” The investor/agent couldn’t have been more excited. In actuality the athlete liked the home so much she actually stayed much longer. This gave the investor/realtor the time he needed to rebuild his residential real estate business, which at that time was his only source of income. It took 8 years — but he did it! Eight years after he had left his home he was able to move back into his residence which had never gone into foreclosure. Foreclosures are on the rise again. If you come across someone facing financial strife please refer them to this blog. There are more and more solutions available to ease the burden and solve the problem at hand!