Over the past 6 years I’ve been in real estate, I’ve done a lot of owner financing and lease option deals for owners and buyers. But until this last summer I had never had a situation where a property was given back on a lease option or a home owner had to foreclose on a buyer.
But, there was a difference with the buyers and sellers of these properties versus the ones that were in pre-foreclosure with the banks. The sellers (who also were the bank on these sales) were willing to listen to the buyers and their situations and if they could help they did. A loan modification took only one day and wasn’t full of false promises and the seller did exactly what they said they were going to do and so did the buyer.
In one case the sales price didn’t change, but the amount they were paying each month did, the seller lowered the amount they were paying and extended the length of the loan 10 years and lowered the interest rate for the buyer by 1%. The seller was happy, they didn’t have to foreclose, and the buyer was happy, they were keeping their home, it truly was a win-win!
But, what happens when the seller does have to foreclose? I had this happen this last summer as the buyer had lost their business and was filing for bankruptcy. The buyer called the seller, the seller answered the phone, and guess what, they talked it out. The buyer was willing to move out as long as they promised not to put the foreclosure on their credit since they had been paying up to that point. (A deed in lieu of foreclosure.)
The buyer was out in 30 days with their credit in tact. The seller had two years worth of payments totaling $48,000 and the property had only lost $23,000 in equity during that time and they got a $10,000 down payment when the person bought it. From first phone call to being back on the market was a total of 13 days! Net loss to the seller was a big zero, because they acted quickly and worked with the buyer for a win-win for everyone.
But, what if the seller had to take a loss? Let us say the property value went down more than the amount paid to them had been? What then? Would they have taken longer to make a decision? Would they have called their congressman for bailout money? Why should the banks get bailout money, while the government talks about ending owner financing? These owners weren't predatory, they were just trying to make money like the banks were, the only difference was they didn’t have red tape and stupidity on their side when things started to go south on the payments.They didn’t tell the buyer that they couldn’t help them until they were behind on their payments, they didn’t say sorry can’t help you now your credit has been ruined.
Maybe the government should learn from the private sector and stay out of business and let business take care of itself as the private home owners have.