Phoenix AZ Home Buyers - Protect your lease-option money

October 7, 2008

There are a lot of Phoenix real estate investors who are renting homes to would-be buyers. Due to the decline in AZ real estate prices and adjustable rate mortgages, many AZ real estate investors and landlords are having trouble paying the mortgage and losing their homes to foreclosure.Phoenix AZ Home Buyers - Protect your lease-option money

Yesterday, I received a phone call from a Phoenix real estate buyer who had read my blog about lease options and wanted some advice.

To preface the story, it seems that this nice woman had entered into  a lease option to buy Phoenix real estate.

She had been paying $2,000 in monthly rent for more than 7 months. She had deposited $5,000 as for the option payment to be applied towards the purchase. She had also been paying an additional $1,000 up an beyond the monthly rent payment as monies to be applied towards the purchase price of the home.In 7 months shed had paid an additional $12,000 in equity payments to the seller.

Yesterday, when she got home from work there was bright colored foreclosure notice on the front door that the home she was renting, living in and has an option to buy is going to be sold at a foreclosure auction, the next day!!

In an undeniable and understandable panic, the tenant called the landlord/owner only to find out that the owner’s phone is now disconnected. She then drove across town to the address where she had been sending monthly payments. The home was vacant, with foreclosure notice on the front door.  Apparently, according to the neighbors, the owner had moved to California in the last week.

The buyer quickly drove home and did some on-line research about what to do?. She called me to ask what options she has remaining.

First of all, I have the unfortunate responsibility of telling the renter that you have 2 (somewhat limited) options.

Although the current law does not require that rental monies be paid toward the mortgage or returned to the renter, the monies paid above and beyond would (according to real estate attorneys) refundable. However, suing someone is costly, time consuming and even in the event you may win, collecting money from people who are in foreclosure and morally and financially bankrupt is a difficult task.

The best option, which has worked for clients of mine is to ask a Phoenix short sale expert, or Phoenix real estate agent who works with Phoenix AZ short sales to contact the bank and explain the situation and see if

  1. you can get the foreclosure sale postponed
  2. possibly buy the property from the bank

I called the bank on behalf of this client and here is what I found out.

  1. The bank was not willing to postpone the sale. If the Phoenix real estate sells today to she would have to move immediately.
  2. If the home does not sell and the bank becomes the owner of the foreclosed home (REO), they bank is willing to let the client stay in the home under a month to month lease until either she can buy the house of someone else.

Ultimately, here is the problem.

The bank is owed around $350K and the bank is not sure at this moment if they would go to $300K (the price of the purchase contract). However, in any case, the buyer cannot qualify for lack of down payment that she was saving as a result of the lease-option. The required money needed is now gone in the hands of an unscrupulous landlord .

Sadly, the bank representative said, “She’s basically been ripped off.”

There are several types of rent-to-own programs like Lease Options and Lease Purchase.

Hire a real estate attorney or experienced real estate professionals who can prepare documents, explain and protect your interests.

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Copyright © James Wexler *Phoenix AZ Home Buyers - protect your lease-option money*

If you are listing your home as a short sale in Phoenix Arizona or Scottsdale Arizona make sure you hire an agent who knows how to do short sales and has the experience to get the job done.

Call 480.221.8080 to find out more about Phoenix Arizona Short Sales and Scottsdale Arizona short  Sales.

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Written by James Wexler · Filed Under Articles, Buyers 

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