Short Sale Deal...can it work?

Question

I am aiming at purchasing a short sale with a lease option/lease purchase (requesting the deed of trust for a small price). The agent is really blocking, as she states that it's illegal to lease option a short sale. I informed her that I would like to work with the lien holder for that cause, and get everyone together, but she's not budging on setting up an appointment with the lender and having everyone at the table. I talked to my agent, who now bowed out due to the complexity of this deal.

I have no money, bad credit, but this house is beautiful, in the perfect neighborhood and I don't want to let it turn into a vacant mess due to squaters, thieves, and such like.

Please inform if how I'm going about is the right way to secure this home. BTW, I'm interested in this house for me and my family, will use as investment property 5 years or so down the line. I am looking into getting a lawyer/attorney to do this deal, please advise if you know of a good one in Maryland.

Thanks!

Stephanie

Richard Dunlop · Answer

Ouch!

DJ Thompson · Answer

Personally I don't see how this would work. I don't know of any investor willing to front 350k cash to purchase the property to do a lease to buy option for another would-be investor. Plus tying up 350k cash to make maybe 30k over the total course of 2 years just doesn't make sense from an investor stand point when you could get cash on cash returns in double digits for 1/10th of the initial investment. You are better off improving your credit, saving a small down payment and closing costs and applying for a FHA loan or some other first time home buyer program through the state. Just my 2 cents though! BTW if you and your significant other have a combined income of 6 figures you should be in good shape in regards to your DTI. Unless you are saddled up with credit card debt..

Bill Gulley · Answer

@Stephanie DobbsYes, I suggest u c a lawyerB P No work

Stephanie Dobbs · Answer

Thanks Bill, So what do you think about this...if I find an investor who will pay cash for the property (say 350K) and I serve as a lease holder for two years and they collect the equity after that point, (when I buy the property from them or refinance if the former was a lease purchase) could that work?

Bill Gulley · Answer

Read enough I think from Brian downBanks loan money, that is their business. They are not in the RE business.You can't wish yourself in a home regardless of your income. HARD money lenders lend at lower LTVs and for short periods, like 1 year tops, can your income pay it off in 1 year?Find another investor to buy it for you, give him 15/20% profit .......Ooops, wait, he can't because it's going to be owner occupied and the investor will need to take you to a mortgage originator to finance the deal to you. You're back to the credBit issue again.Why not wait and fix any credit issues, wow, I'm not saying anymore, BP nnnnn not rerespondinging!

Richard Dunlop · Answer

A hard money lender WILL NOT back you on this deal. That REQUIRES that you find a good deal. A hard money lender will only pay ONE HALF of the value in this scenario.

Wayne Brooks · Answer

@Stephanie Dobbs No, this will not work, period. The bank wants a qualified buyer, at an acceptable price, period. Not a lease purchase deal. Banks are wise to the scam "POF off the internet thing". Besides, your HML is only going to lend 65-70%, and will NOT, can not, lend to an owner occupant, so even as an investor, you'd have to have, and show real proof of, the other 30-35%. The listing agent is right in not entertaining your offer, as he'd simply be tying up the owner's property for60-90 days, preventing him from selling it to a real buyer, getting that much closer to an auction. I'm guessing your agent told you the same thing, which is why he dropped you. No money and no credit means no buying off the MLS, or from a bank, or any other educated seller.

Stephanie Dobbs · Answer

Thanks, I'll stick to the positive that you stated, and search for a hard money lender that will back us, as I know we can cover the payments. Proof of funds is easy to acquire. - Stephanie

Richard Dunlop · Answer

This is not a workable deal from any standpoint that I can see. It takes credit!You mentioned $20,000 difference in price; I don't know the price range you're in but in most areas the premium for a new house vs 5yo would be MORE than that. So the house is overpriced to start with. I buy houses at 15%-20% of current fair market value.A hard money lender will put up Half only in this scenario.All of the various methods on this website REQUIRE finding a good deal except for owner occupied FHA/Conventional financing and that takes at least mediocre credit.

Stephanie Dobbs · Answer

Between my husband and I, we make a six figure income through our full time jobs, just nothing worth counting in savings, as we recently had some car surprises (meaning repairs) that were incredibly underestimated by our standards.