Is a Lease Back the Answer to Foreclosure?

A lease-back may be the answer to foreclosure and staying in your home. .   However, most lenders will not approve a short sale when a private investor is purchasing the home and leasing the home back to you (the homeowner).  This is considered an arms-length transaction.

A lease-back is also known as a lease purchase option and/or rent-to-buy or rent to own and you should be very careful when considering this type of transaction

What’s a lease back? 

It is a transaction whereby you (Seller/homeowner) sell your property to an investor (Buyer) and then you will lease it back from the investor with an agreement to buy back when it is comfortable for you.

What’s the Purpose of a lease back?

A lease-back will allow you to stay in your home and repurchase at a future date.  It will give you the opportunity to resolve or correct any problems that you may be currently incurring, such as, current mortgage payment is too high, job loss, layoff, cutback in salary, over-extended in credit card debt, no equity in property, illness, and the list goes on.

How does it work? 

  1. The investor will purchase your home at below current market value.
  2. You will continue to stay in your home while making payments that are below current mortgage payment levels.
  3. Your property will be sold back to you at current market value for a reasonable rate. You will have the option of purchasing your property back at any time when your situation has improved or it is comfortable for you.

What are the Benefits to You and the Investor?

For You (Seller) —The obvious……you stay in your home.  This means that you will not have to disrupt the comforts of you and your family. If you purchased your home when market values were high and received mortgage loans (option arm, negative am), then you are more than likely upside down and your payment is more than you can afford.  You will now have the opportunity to purchase your property back at less than what you paid or borrowed.

For the Investor (Buyer) –the buyer will purchase the property at below current market value while leasing back the property to the seller at premium pricing.  This means that the buyer will gain a return on his investment via seller’s debt servicing and the initial gain.

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