Personal Lending

Private investors can assist homeowners in foreclosure in many unique ways that banks simply can not help with. While many are simply looking for great deals on distressed or foreclosed property, attempting to quickly buy low and sell high, others are willing to allow the previous foreclosure victims to live in the house after the foreclosure. This ensures that the homeowners stop foreclosure but also have a second chance to regain their homes, while they avoid the expenses of moving and can concentrate on repairing their credit and becoming financially stable. The investor makes money on the foreclosure property while the homeowners are paying monthly installments, and will collect a lump sum payment when the house is sold back to the homeowners.

While investors can use various financial instruments and documents to put together the agreement between them and the homeowners, the two most commonly used are the land contract and a leaseback or rent to own agreement. Although the terms may be used interchangeably, in some instances, there are more differences between them than similarities. Each provides the homeowners and the investor with a different level of protection and interest in the property, as well as unique advantages and shortcomings. But by understanding the basics of how each works, both parties to the transaction will be able to protect their own interests, while also entering into a mutually beneficial arrangement to avoid the foreclosure.

In essences, a rent to own agreement, also known as a leaseback, is simply a lease agreement, where the homeowners would be renting the property and a portion of the payment each month might count towards a down payment later on (although this is not always the case). The agreement would also give the renters the right to purchase the property at a later date upon completion of the contract, so the investor, the current owner of the property, could not sell it to someone else and leave the former foreclosure victims with no place to live. Even if the private investor did sell to someone else, that new owner would have to honor the tenants’ rent to own agreement and sell to them at the appointed time. Rent to own agreements are not generally recorded with the county because it is just a type of standard rent agreement. Leases are not recorded with the county, in nearly all cases. The renters under a leaseback arrangement do not have any ownership interest in the while just renting.

If the tenants default on their payments under a rent to own agreement, the private investor will be able to evict them. There will be no lengthy foreclosure process, and the landlord would simply have to prove they gave the tenants notice to vacate in the correct manner and that the payments were not made. Because there is little protection for the renters under this type of agreement, it is important that the payment terms be affordable, and the former foreclosure victims be given the financial leeway to begin a savings plan. If the lease agreement is prohibitively expensive, this type of arrangement between the foreclosure victims and the private investor can quickly end up in another situation where the tenants are losing their home.

A land contract, though, is essentially where the current owner sells the property to the former foreclosure victims and transfers the ownership rights and responsibilities under a written agreement. The tenants in this case probably would still not be on the deed until the contract was completed, but in the meantime, they would be responsible for maintaining the property, paying the taxes, and have all of the other obligations of owning a home. However, they would also enjoy the benefits of home ownership, which includes deducting county property taxes from their income.

Land contracts are usually recorded with the county to show the ownership interest in the property, and are generally more protective of the rights of the former foreclosure victims. If the situation arises where the family is unable to pay the agreements, the investor would have to proceed with a foreclosure on the house; he could not simply evict the tenants. This gives the homeowner more protections under the law, as the foreclosure process can take much longer than an eviction process involving a rental agreement. The investor will have to sue for a judgment, sell the house at a sheriff sale, and honor any redemption period or other aspects of the foreclosure laws that come into play. Thus, the tenants’ interests are protected much better under a land contract than a rent to own agreement.

In either case, the homeowners need to do as much research as they can and make especially certain to read any documents they will be asked to sign. Working with a private investor to prevent foreclosure can be one of the most effective ways to save a home, offering numerous creative solutions. However, this is always the possibility of being taken advantage of or finding oneself in a situation where circumstances have gotten way out of hand, with little or no protection under the law. With foreclosure scams lurking around every corner, it is important for homeowners to take in as much foreclosure advice as possible, while evaluating their options and choosing to work with an investor who will protect their interests as well as his own.

The ForeclosureFish.com website helps homeowners save their homes on their own by providing relevant information and advice that they can use to put together a plan to avoid foreclosure. Hundreds of pages of articles, foreclosure blog entries, and reference materials are available for foreclosure victims to search through, and basic explanations are given for every known method of ending the foreclosure process, including deed in lieu of foreclosure, hard money loans, and private investor options. Visit the website today to learn more about how foreclosure works, and download a free e-book explaining the basics of the process and how to stop it: http://www.foreclosurefish.com/