Lease Purchase
I recently aquired a property in pre-foreclosure. The re-instatement total was about $5,000. My attorney transfered title and they signed off on the property. I then re-financed the existing mortgage to pull some cash out (70% LTV). The couple that was losing it said they wanted to try and work something out in order to keep their home so being new to the biz I agreed to lease purchase it back to them over a period of 24 months. They agreed to pay back the $5,000 re-instatement amout by way of installmnts of $210.00 over the next 24 months which I added to their existing mortgage payment of $650.00. I did not charge them any interest on the $5,000 however, they agreed to pay me a fee of and additional $5,000 upon fullfillment of their lease plus they agreed to re-imburese me for any repairs that I would do to the house during that 24 months such as new roof, paint, etc. They also gave me $1,200 consideration money to apply to the purchase. From the get goI knew that these folks probably wouldn't be able to fullfill their option and so far they have been late 3 times on their payments which contractually defaults thier option already. I don't have a problem with them not fullfilling their option because it has tremedous equity but the reason I am telling you all of this is to see if anyone else has experienced or done a deal similar to this and in the end, how did it turn out? I am still pretty new to RE investing and I just read today through Carleton Sheets "Cashing in on foreclosures" study guide: and I quote,"don't allow a seller to stay on as a renter with a lease option to buy the property back." He said "Courts may (and have in Texas) construed this to be an usurious loan and you could lose the property back to the seller and be liable for treble damages. What are the odds of this really happening? These folks were losing thier house. I actually approached them 2 days before the courthouse sale and saved them from being put out on the streets. I personaly think they knew they would struggle to fullfill the option and were really just buying some time vs. having to pack up and move. I felt as tho I actually offered them a service. Do I have anything to be concerened about?
Thanks for your response.
Dan 
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