Owner financing questions

3 Replies

I am interested in purchasing a home from a homeowner who needs out of his house due to being behind on payments. He has health issues and fell behind on payments, had an adjustable rate, etc. The bank is not working with him and so he need to sell ASAP The home is priced at 1/2 of appraised value so it’s a good dealFor me. My question is: Is it illegal for me to buy this home and then owner-finance It back to this gentleman/homeowner who is facing foreclosure? The reasons are: he is older, he is unwell, he has no place to go, he can cover the owner financed costs as they would be much lower than what he has with the bank. I don’t want to do anything immoral or wrong; I realize the mortgage company has been shorted money by him being so far behind on payment. Any thoughts would be appreciated.

@Amy McDonald   Welcome to BP Amy!

Focusing on the numbers part of this, are you sure it's listed at 1/2 of appraisal price?  If so, why hasn't someone purchased already?  Have seen the appraisal?  And you mentioned the bank is not working with the homeowner, so it's not a short sale - correct?

Throwing some example numbers, if it's appraised at $100k, listed at $50k, and the homeowner owes, say $35k including all fees, then it's a straight forward purchase and a win-win.  But again, I would think there would be an instant bidding war the first day it was listed and would have sold already.

- Tom

You can always rent the house back to the current owner.  Just be sure you know all the numbers.  How much is owed to the bank?  what fees the bank is adding to the loan etc?  also know history on mechanicals roof, AC etc.  How soon will they all need replacing?  In general how well does the current owner take care of the house.  Learn as much as you can so you avoid big surprises.

Originally posted by @Tracy Brown :

You can always rent the house back to the current owner.  Just be sure you know all the numbers.  How much is owed to the bank?  what fees the bank is adding to the loan etc?  also know history on mechanicals roof, AC etc.  How soon will they all need replacing?  In general how well does the current owner take care of the house.  Learn as much as you can so you avoid big surprises.

 in an open market transaction, yeah, I agree. In a short sale transaction, you cannot rent back to the current (soon to be former) owner.