Need Help on Structuring a Deal!

[Shelly Smith]

I have a seller who is going through foreclosure and seeking to sell his home. He needs the full amount now. He currently has a tenant in place who is willing to either continue the lease or purchase the home under a lease option (both have spoken to me about help). Would you first purchase the home from the seller using a purchase agreement, then find a buyer to assign the contract to and let the tenant work with the new buyer on a lease option after close or how would you structure that deal? 

[Bill Gulley]

Originally posted by @Shelly Smith:

Thanks to both of you. So this is a new deal and the tenant just called me about it, but is going to have the seller contact me asap because they want to work with me. Just want to make sure I have the correct information in place as to how to inform him I can help. The tenant told me that the seller would like $275K for the property and comps in that area are $260K to $300K for the same house.....but I think subject to may be the best way to go should he want to pursue the deal with me. Thank you so much for the advice!

May be Devan missed the part about foreclosure!  And, besides the equity stripping issues, assuming responsibility for a mortgage being called due......well...

1. it delays the foreclosure process, it's illegal interference changing title, a federal matter under new foreclosure rescue laws; and

2. your failing to pay off the note as agreed in a Sub-To opens you up for the seller to sue you later on; and

3. it also opens you to a law suit from the tenant from two angles, one, you lost their leased home and two, you failed sell to them as agreed.

4. then there is the predatory lending/dealing suggested to make sure you sell to the tenant above the market value; and

5. if your sale to the tenant involves wrapping the sub-to debt, now you're in violation of Dodd-Frank!; while

6. I mentioned the equity stripping, it too is illegal as you are taking rents that most likely go to the lender under the deed of trust to be applied to the debt.

The risks? Oh,  hundreds of thousands in fines and/or 10+ years in a federal facility along with civil suits!

You can't structure a "deal" when there is no deal. Saying comps in the area giving a range is not a stated value for the subject property. It is an indication that the seller wants too much and especially if it is going to be any "deal". Comps mean nothing until you adjust their values to the subject property, and it doesn't mean the subject will fall in that range either.

In this, you need cash! A cash buyer and it doesn't sound to me like there is much room to profit even if you had the cash or a cash buyer.

Just because you find a situation that is distressed, it doesn't mean a rabbit can be pulled out to make money from it.

@Brian Gibbons, now you could have mentioned this stuff too. :)