Actually, this is probably not a good idea. Certainly not in CA. Such an arrangement would be considered, if the delinquent borrowers/rescued folk were to take you to court, a “hidden mortgage” which means no eviction. Judicial foreclosure is required to get them out. And it might not meet the restrictions on usurious interest rates also. If it did, there would not be much payoff. Not a good way to go in CA, and perhaps not in other states too.
Posted by Jess Cova on January 01, 2003 at 23:59:15:
Well I was thinking in going into Foreclosures and I thought to my self What if the people or Families Where in need of some money to get out of defolt. I could loan them the money and help them if and only if they Deed the property to me and once they pay me back I would Deed it back to them.I could make good money if they pay me and if they dont pay me the house would already be in my name. And if they did not want to move out just sell to another Invester. It look like a win win for me. I live in California so dont know if it`s Legal. Because in a way its taking at advantage since I know they cant pay there House I know more than likely they will not pay me.
Posted by Strange Tanks¶ on January 03, 2003 at 24:32:31:
I think finding people before they are foreclosed on and also willing to work on something creative to save themselves s the hard part. One option if the owners want to continue living in the property is to purchase it or assume the existing mortgage. Then lease option it back to them for the cost of the mortgage payments plus expenses plus a small profit. Give them the option to buy it back from you for the same price you bought it for. If they miss payments an eviction can e filed.
What you have proposed is old hat. It has been in the courts many times. I’d suggest that you would be better off ignoring foreclosures and getting into some more traditional ways of investing in real estate, whether in CA or elsewhere. If you have not already ready my article “Are foreclosures for you?” (or similar) in the money-making ideas section, I suggest you do so.
This is only legal if done within the laws which apply to “equity purchase” or purchasing. You need to read the “equity purchase statute” and the “foreclosure consultants statute” of the CA civil code. You need to study the laws very carefully as the penalties for not doing things correctly in CA are very harsh.
And the structure you have suggested is probably a very bad idea. In CA, such a “deed” to you could be interpreted by a judge–and has been interpreted by judges in the past–as a “hidden security instrument,” and should be treated as a MORTGAGE–not a trust deed, but a MORTGAGE–that means that you would have do a judicial foreclosure to get the occupants out of the property, which could take a very long time, depending upon how backed up are the courts where you do this. You might call local superior courts and ask them about how long it takes to get cases to trial if they are filed now. Also, you would probably be violating the state usury laws, unless you specified a very low interest rate on your loan to the people. To find out how low, call some title companies and ask them what interest rate you can legally charge on loans which do not go through a mortgage broker these days.