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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Re: Looks like an increased risk to me... Posted by DavidF on May 13, 2003 at 1:01 AM In Reply to: Looks like an increased risk to me... posted by Ward-CA- on May 12, 2003 at 10:46 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. : =•=•=•=•=•=•=•=•=•=•=•= : David, : Yes, I agree that defaulting owners would be more receptive to any purchase offer that allows them to stay put and not move out. And no matter when you try to move them on, they’re going to fight you tooth and nail. : So how are you going to keep your money moving if you don’t buy/sell as often as possible? : Section 1695.12 doesn’t deal with the issue of usury. : Yes, you might get more “deals” initially offering owners a lease option. But I think you’ll be taking a much greater risk of lawsuits and governmental interference with your deals overall. : But all this talk is just pure speculation on both of our parts. The proof of the pudding is in the eating. So why not try out your way for six months and keep a tally and let us know how it worked out, both pro and con. Thanks, Ward. You asked, "So how are you going to keep your money moving if you don’t buy/sell as often as possible?" I think the trick would be to use "other people's money" rather than your own. That is, don't take the property "subject to" and cure the loan(s) using your money, but rather refinance and fold the back pmts/fees into the new loan. It remains to be seen how easy it will be to find a lender willing to underwrite many low LTV deals per year for my corp. Follow Ups: Post a Followup: Name : E-Mail : Subject : Comments: : : : 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. : : =•=•=•=•=•=•=•=•=•=•=•= : : David, : : Yes, I agree that defaulting owners would be more receptive to any purchase offer that allows them to stay put and not move out. And no matter when you try to move them on, they’re going to fight you tooth and nail. : : So how are you going to keep your money moving if you don’t buy/sell as often as possible? : : Section 1695.12 doesn’t deal with the issue of usury. : : Yes, you might get more “deals” initially offering owners a lease option. But I think you’ll be taking a much greater risk of lawsuits and governmental interference with your deals overall. : : But all this talk is just pure speculation on both of our parts. The proof of the pudding is in the eating. So why not try out your way for six months and keep a tally and let us know how it worked out, both pro and con. : : Thanks, Ward. You asked, "So how are you going to keep your money moving if you don’t buy/sell as often as possible?" I think the trick would be to use "other people's money" rather than your own. That is, don't take the property "subject to" and cure the loan(s) using your money, but rather refinance and fold the back pmts/fees into the new loan. It remains to be seen how easy it will be to find a lender willing to underwrite many low LTV deals per year for my corp. Optional Link URL: Link Title: Optional Image URL: [ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] WWWAdmin 2.0a © 1997 Matt Wright and DBasics Software Company, All Rights Reserved

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