Profitable house to sell before I claim Chapter 7

[Chris H]

Hello, I have a nice SFR rental in CO that has a great tenant on a 3 yr Lease Option with $24K built in profit (worst case) once they buy. The balance owed is $139K, the home value is around $165K, the tenant is paying $1150 on a 3 year option. I am claiming CH7 and don't want to screw them over as they've already been there 10 months and are great tenants. Can I sell the home before claiming BK? If so, how do I let the potential buyer know that there is about 2 months in back payments due and that I want to ensure that the tenants lease options stays in tact?
If an investor would buy it with a 6% loan the deal would look like this;
$145K purchase price (if I could get something out of all of my years of work on this home) at 6% would be around $989 PITI. The renters are paying $1150/month leaving $161/monthly cash flow. The deal is set to sell to the renters within the next 2 years at an agreed upon price of $163K. This leaves a great return depending on how much the new buyer puts down, etc. Any ideas thoughts if I can legally sell it before BK, if anyone can advise where to try to sell something with this scenario, etc.?

[Jon Holdman]

Have you spoken with your bankruptcy attorney? What does he or she recommend?

You don't need to let your buyer know about the back payments. You'll have to pay those off when you sell. Thinking it through, the $145 should just cover your closing costs and back payments.

As a rental $145K is way too much to pay for $1150 in rent. Yes, I hear you that its theoretically sold as a rent to own or something. But your buyer's not getting that down payment. Many rent-to-own's never close. So its, at best, slightly better than a plain vanilla rental.

The best case scenario is the tenant does buy it two years from now for $163K. They never call once in those two years and nothing has to be fixed. So, you get to pocket the $161 a month for two years. Your buyer's going to pay something like $3000 in closing costs when they buy, though they will get a credit from you for the 2010 taxes. So, figure $2000 out of pocket. When they sell, they'll pay another $2000-3000 in closing costs. So, they net $160K on the sale. They pay themselves (and their lender) back the $147K they put in up front, leaving a profit of $13K plus the $161 a month (a bit under $4000.) Profit for the two year investment: $17K. That's if things go as well as they possibly can go.

You'll be more likely, I think, to get these people to refinance and pay you off.