One of the most common questions I get from sellers is “Can I buy m house back after the short sale is done”. The truth is that there are cash investors, hedge fund buyers as well as non-profits out there that specialize in doing just that. They will buy the property as a short sale then lease option it back to the original seller after 2 or 3 years. It’s actually a great option for a seller because they don’t have to deal with the hassle or expense of moving all of their stuff to another house.
Even though there have been laws in the past that have prevented these situations from happening, there was an amendment made to the “Making Home Affordable Program” that now allows a Non-Profit Organization to buy a property then lease it or resell it back to the seller. However, in order for everything to be done legally all requirements under the “Home Affordable Foreclosure Alternative aka [HAFA] must be met by the seller. As with any important transaction, it’s important that you read the fine print.
Here are some things to consider when entering into a buy-back agreement with a non-profit organization or cash investor.
1) You must qualify for a HAFA short sale in order for this to be an option for you. Not only that but even if you do qualify for a HAFA short sale this buy-back program is still subject to the approval by your lender. In other words, even if you meet all the requirements from HAFA, your bank still has to approve the sale of the property to a non-profit organization. There’s absolutely no guarantee that your lender will agree to this arrangement and you just won’t know until you try.
2) If the home is not your primary residence, you won’t qualify for HAFA. In the lender’s eyes..you purchased this home as an investment which defeats the whole purpose of the HAFA program.
3) When using a cash buyer expect to pay full market value for your home when it’s time to close. Cash investors expect to get a decent return on their money when entering into any lease option agreement. The deal just wouldn’t make sense to them if they weren’t guaranteed a nice profit when it’s all said and done. A typical cash investor will want at least 3-5% of the purchase price as a non-refundable deposit [sometimes more] to ensure that the buyer will do everything in their power to close on the deal. And if they’re not able to close, the investor gets to keep the deposit as well as the property. Also, you can expect to pay a higher than the average interest rate, I’ve seen investors charge as much as 13% interest on a lease option contract. Cash investors will usually want full market value for the property at the time of the contract signing. This can be a double-edged sword because if the property appreciates over the time of the lease contract, then it benefits the buyer. However, if the property depreciates over the time of the contract, then it benefits the investor because the purchase price was locked in at the signing of the agreement.
A short sale may still be your best option
Even if you’re not approved for a buy-back program, a short sale may still be your best option. Surrendering a home that owes much more than it’s worth is a smart business decision. By doing a short sale, a homeowner can walk away free and clear from debt. Many times homeowners can even come away from the closing with thousands of dollars through certain programs. Throughout the years we’ve helped thousands of homeowners avoid foreclosure by completing a short sale on their homes. Our team of dedicated real estate professionals is dedicated to finding real solutions for Orlando homeowners that are facing foreclosure.
