Last month I wrote an article called "In Default in Oregon, don't get conned by the "We will buy your home and lease option it back to you" scam" In this article I wrote about people about to lose their home to foreclosure and having an investor come in and save them at the last minute and lease option the property back to them.
In that article I stated that this is illegal to sell a property and lease option back from an investor and in most cases it still is. But as always there are cases where it may not be. This caller was in one of those situations, but I still advised them against doing it, because the odds of them getting the home back were still less than one percent.
You see this caller had a situation unlike most people that are approached with this. They had equity and could sell their property at a discount to an investor who was willing to lease option back to them for a year at a discounted rate, then at the end of the year they could buy the home back for 10% more than they sold it for. Why was it not illegal for them? Because they were not requiring the bank to take a loss on the home that they were planning to buy back for less than they originally owed. If they had done it that way it would have been mortgage fraud. But, since they had equity and could sell it, pay off their mortgage and still have equity left, then it was fine. They even had enough to cover the 10% in a year.
The only problem that I had with it is the odds of them fixing their credit in less than one year was still less than one percent and then they were throwing away, in this case, 20% equity to an investor on a false hope of them getting to keep their home. I told them they were better selling it off and keeping the 24% equity they were about to give away to an investor, and pay off some bills and use the money to lease option or owner finance another property for a longer period of time. Giving them the true amount of time they needed to fix their credit and get a traditional loan.
I'm not sure what they have decided, but I'm hoping they took my advice and next week I can have the opportunity to put their home on the market and save them from foreclosure.