selling short sales to their previous owners

[Mathew A.]

A homeowner has a house valued at $40,000, but he has a mortgage for $100,000. Can he sell me the house for $30,000, and then I sell it back to him for $50,000 with owner financing?

Are there provisions in a short sale contract that say the seller cannot purchase the property within 1 year, 5 years, ever? I don't see how that can be in the contract, but I also don't see how the buyer can purchase at a discount and then sell the house back to the original seller while the lender loses tens of thousands of dollars.

Thank you in advance.

[Maryann L.]

Matt, I can't tell you how many times homeowners have asked me this.

Can it be done? Sure...but if you sign some sort of arms length transaction paperwork or something else that states in no way will allow the previous owner to rent or buy the property back, you could be facing a nice lawsuit.

If you WANT TO ATTEMPT IT, write it right into your purchase contract.

"Buyer intends to sell or rent home back to seller"

If the bank accepts that language you're good to go, but if you sign something saying you agree not to let the seller back on the property, I would stay clear.