Owner owes back taxes and is about to be foreclosed on

[Frank M.]

Hey guys! I have a strategy/financing question. I am curious how to approach a homeowner that is about to lose their house due to 8k in back taxes that they cannot afford. They want to stay in the home as it has special meaning to them. Is this prime for a Sale Leaseback? Or are their other strategies that would be more beneficial? I want to take ownership of the house but still allow them to live there. Obviously I am trying to pay the least possible for the property. I am also considering assuming the mortgage but for me to cash flow they will be paying me more than what they currently pay for the mortgage when it seems they are already on a tight budget. Thanks for any feedback!

[Mitch Messer]

Hi @Frank M.! I see two big problems with a sale leaseback in this situation. First, if they can't afford their current payment, they definitely won't be able to afford your (higher) lease payment. This is an eviction in the making; it's only a matter of time. Which brings up the second problem...

After you've paid their $8K in back taxes and purchased the home subject to the existing mortgage, they are going to eventually get into financial trouble again. You're going to try to evict. And that's when they are going to claim that they didn't understand that they were selling their house and that they've been bamboozled by a sneaky real estate operator (that's you!). They'll forget the tight spot you got them out of and demand their house back. Maybe a judge listens, maybe not. Either way, you'll be the bad guy and will lose, no matter the outcome.

Whatever "special meaning" the house holds for these folks wasn't enough for them to keep up the tax payments. They need a cheaper place to live.

Purchase the home, if it makes sense, but I'd strongly recommend paying them a few bucks to get them out and then finding a tenant who can actually afford to live there.