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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ]

Giving distressed seller option to repurchase later

Posted by DavidF on May 12, 2003 at 3:22 PM

Ward,

Most distressed property owners I encounter are reluctant to sell property to equity purchasers until they have exhausted all alternatives to keeping their house (refi, money from relatives, etc.). This means that if they decide to sell their house, it's usually at the last minute to a number of competing investors hovering at their door days before the auction.

I believe distressed owners would be more receptive to earlier offers to purchase their property if the contract also gave them a lease with an option to buy the property back. I know that California Civil Code 1695.12 says that such arrangements are seen by the legislature (and probably the courts) as a loan rather than a purchase.

What additional risks are investors taking if they purchase property with a seller lease and repurchase option? Does 1695.12 mean CA usury laws come into play here?

No doubt a portion of the sellers would "get back on their feet" in time to repurchase their property, but a portion wouldn't. Offering this deal would give me an advantage over other investors that only offer purchase with no lease/option.



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