Quote:
Originally posted by lendaddy
Randy,
They don't deed it back per se, Person A must legally purchase it back from person B via cash or financing.
Person B legally purchases the home from Person A initially as well. The only hitch is a legal contrct where B must sell to A at a predetermined price after two years of successfull payments and subsequent buyout.
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Gotcha.
In this case, it turns 'em into renters.
In reality, if there's at least 30% equity in the house and there's benefit there - if you have a pulse and a job you can typically get a loan. If these "investors" are doing this and leaving themselves less than 20% equity after it's all said and done - there's a lot of things that can turn your lights out -
1- value drops from corrections in the market will eat your margin for safety - it'll take you 10% just to get rid of the house if you need to dump. Also if the value goes down then your renter has to qualify for a higher loan to value mortgage - making credit much more an issue vs. lower equity
2-Doing this turns 'em into renters and gives them renters rights - including the right to BK if they want. That's a big mess too.
I would only consider doing this if I was reasonably sure after everything is paid out there was at least 25% equity left in the house - you could lose 10% value in a year and still have enough there to pay a realtor, pay yourself and get the hell out. You try this any higher and you could wind up owing money to get out.
Just my $.02
rjp