Loan Modification before Lease Option? Need Help with RE Strategy

[Lokesh W.]

I have a home owner who wants my help in selling her home by doing a lease option. The home is in good condition but has negative equity. They have not missed any payments. I am trying to do a cooperative lease option (i.e. I will assign my lease option to purchase to another retail buyer on rent to own basis for a fee):

Market value: 150K
Seller owes: 160K
Seller payments to the bank (mortgage + tax + insurance): 1500/month

The owner does not want to bring in any money to the closing table. Initially, I suggested 1500 a month rent with $200 rent credit but this will not work out.

Based on what the owner said - if we rent at 1500 a month and owner uses this as the monthly payment, then they will owe 150,000 in year 2019 so this may not work out.

I am thinking of doing a loan modification to bring down the payment or interest rate and then a lease option. Is this possible?

Any suggestions to make this a Win/ win/ win situation using lease option for the seller, tenant buyer and I??

[Jon Holdman]

Sorry, but I'm a little dubious of this "I'll bring money to the closing table when they exercise the option" strategy. What happens if she can't or won't bring the money several years from now? What if prices continue to fall and she has to bring even more money later? Its easy to make a promise now that has to be kept later. At $150K or so the seller will have $3000 +/- in closing costs, plus the shortage. Could you get her to apply this cash to the loan now? If she reneges when the t/b chooses to exercise their option, what do you do? You may think you're out of the deal, but I suspect you'll be hearing from the buyer, and not in a pleasant way.