Helping A Friend In Foreclosure
I have never done a foreclosure and I have a friend in foreclosure that wants me to purchase his house and do a forbearance agreement with him. It has already had the sheriff’s sale and the bank bought it. In Minnesota the homeowner has 6 months to sell or buy back the home after the sheriff sale. I have several questions.
1. Who will I be buying it from him or the bank? Can I offer less to the bank then what they paid? (no default judgments allowed in MN if done within 6 months)
2. I am thinking of doing a lease option to him under these terms:
I buy the house for what is owed plus fees, closing cost, and 10% fee for me. Then get a mortgage and lease it to him for $300 month positive cash flow and he can buy it in 2 years for what I paid and if he defaults I get his $100k of equity. So I make 10% plus $7200.
Does this sound like a good deal? Am I missing anything? Is it legal to charge him a 10% fee?
Thanks in advance for your help.
Kenny
Best way is to get a Quit Claim Deed, which extinguishes his interest, and redeem it yourself. YOu could pay him for it, I usually pay something for them. Be very careful how you do it--and be sure he is truly a friend, since this arrangement could really mess that up--because MN has strong laws against reconveyances, should he feel slighted and make a stink. See, for example,
http://www.revisor.leg.state.mn.us/stats/325N/17.html Actually, the whole of section 325 is worth a look, search the statutes to see what you may be up against.
Thanks for the information. I have read all of section 325. From what I read there, as long as I make sure he can afford the lease payment and his DTI is 60% or less and I have a contract with him up front, even before I buy the property, I should be covered. Is it legal to charge him 10% up front or do I have to wait until he exercises his option? When I redeem it do I pay only what is owed or can I pay enough to cover fees and my 10% and have him rebate that to me at closing?
Thanks again for the good advice.