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Updated about 3 years ago on . Most recent reply
![Brian Kempler's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/2320433/1694742336-avatar-briank604.jpg?twic=v1/output=image/cover=128x128&v=2)
Foreclosure: Cash sale vs lease option
Foreclosing is my least preferred scenario but if/when it happens, and no one bids for the property at auction, I wanted to ask whether you guys prefer listing it with a realtor or doing seller financing or lease options.
At the moment I lean towards lease options. My reasons are:
- I'm primarily trying to avoid rehabbing and landlording. L/Os would allow offloading both responsibilites to the tenant buyer, for a discounted sale price.
- L/O tenants can be evicted instead of foreclosed on in the worst case
Downside is not being cashed out right away though.
How do you guys usually exit your foreclosures? If some other option like BRRR or landlording that would be interesting to hear about too (I suspect note guys don't favor those though)
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![Adam Walter's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/270403/1623094448-avatar-adamw5.jpg?twic=v1/output=image/crop=1200x1200@0x18/cover=128x128&v=2)
It all depends what your financial goals are. I currently have a foreclosure in the works and if I took it back at the sale (which is unlikely in todays market where I am located), I would probably sell it via lease option. The reasons I would do this is:
- It allows me a second bite of the apple
- I can get a loan on the property and wrap it with a land contract
- The property is close to where I live and I know the area well
Most note investors want the most passive form of income and would probably sell. I am a full time investor and I look at my return on investment and passivity together before making a decision. If the property was out of my state, I'd would be more likely to sell, since I don't know the laws as well as I do in Ohio.
I am closing on a property today that I purchased in 2010 and then sold on a land contract in 2015, I took it back in 2020 and resold it on another land contract and made and extra 30k while charging 10% interest on the remaining balance. It's a 4 unit apartment building and the second buyer fixed it up and sold it yesterday, I have to sign off on the deed today. The second buyer hasn't paid any real estate taxes, the water bill, or insurance since he took over, so I had to deal with those phone calls and letters, but the extra income was definitely worth it in my opinion.