Need thoughts/advice on this

[Drazil65]

We have had our house on the market since July, no offers. We filed recently and 341 is on 1/17/12. Our R/E agent called today to tell us that another agent called her today to see if we would be interested in doing a lease option to purchase. This couple saw the house about 2 months ago, wife fell in love with it, husband likes it but not sure this area is where he wants to be for the next few years so would like to "try it out" I guess. We are a stay and pay (I guess if our bank will agree as we have not heard anything at this point).

We are on a modifed mortgage (since last year) at $900 a month, the agent told us that the couple is willing to pay $1650 a month and want to move in "around" 2/1/12.

Ok, we would also ask for a good faith deposit in case they don't purchase after year is up. So, would all the rent money automatically go to the trustee each month? If we open this can of worms would the bank tell us to move (maybe DIL offer) and they deal with the renters/Lease option people directly? Do we add the extra stress of moving in the next 60 days as well as waiting for the chapter 7 to discharge? Lots of questions but really need some thoughts on this maybe from those that actually did this???

Thank you all so much!

[justbroke]

I personally wouldn't do the lease option. I had nothing but trouble. Sure, you can get a "large" deposit on a lease purchase and then "default" the renters the first time they're late and keep the money. That's how some people do their lease-purchase properties. It's all about keeping the large deposit.

The real key, though, is just how much you'll sell for? Additionally, will this end up a short sale later or a normal sale? How long is the option -- 1 year or 2 years? If the couple pays $1,650/month, how much is going towards a credit at closing... the difference between $1,650 and $900?

In the end, is it worth it? If you move and your new rent is over $750/month then that is extra money you're paying each month. What's the true cost to maintain the property? Will your lease option grant them full rights as owners? Will they pay property taxes? You'll still need to carry insurance. What's the true cost of the lease option?

It's all about the math!

[jst4f]

What is your intent for the house? Is it underwater or is there realizable equity for the trustee to take? If you plan to stay and pay and the trustee can not take the house, I would wait until after discharge and close. I would not take the chance of moving and then lose the rent and have two payments to make In addition, the rent would be considered income that could drive you over into BK13. If you do decide to do a lease option, find an expert in your area to guide you on the contract. There are a lot of scams involving lease options and you don't want to become a victim.

[Drazil65]

Thank you so much for the input, this is exactly the kind of info we were looking for. We have equity in the house, how much at this point is anyones guess. House is 2 years old, in a golf community and last year when we modified the appraisal came back at $309,000, we owe $240,000. We put it on the market in July almost $40,000 under appraisal figuring comps are down and hoping to sell quickly, too much inventory here, people taking their time looking no offers yet. This couple first saw it 2 months ago (2 times). We put it on at the lower price knowing that after real estate fees and closing we would pocket minimal and I would get half of that, trustee could only take husbands half of whatever (husband filed alone).

We do not plan to reaffirm and we are current so we are stay and pay (unless bank decides they do not want us to continue to live here). I am thinking about the stress of trying to move so quickly and still having to keep up the property. The rent sounded good especially since its been so long since we have had any extra (??????) money.

[murphsmom]

Keep in mind that many people ask for a lease option because they can't qualify for a mortgage on their own. While the "we'd like to try it out" sounds like a reasonable explanation, I'd also ask for a credit report for these people. The last thing you want is to move on, counting on the rent $, only to get stiffed and not be able to pay at all. Also, if you don't reaffirm the mortgage, the bank can technically foreclose on you, even though that would take awhile, you should know what the ramifications are if the renters suddenly get put out on the street by the bank, can they sue YOU?

I'd wait until after your discharge, and also have a clause in the rent to own agreement that if the bank ever forecloses, you can't be sued by the renter. Not sure they would be agreeable to that though.

[jst4f]

Thank you so much for the input, this is exactly the kind of info we were looking for. We have equity in the house, how much at this point is anyones guess. House is 2 years old, in a golf community and last year when we modified the appraisal came back at $309,000, we owe $240,000. We put it on the market in July almost $40,000 under appraisal figuring comps are down and hoping to sell quickly, too much inventory here, people taking their time looking no offers yet. This couple first saw it 2 months ago (2 times). We put it on at the lower price knowing that after real estate fees and closing we would pocket minimal and I would get half of that, trustee could only take husbands half of whatever (husband filed alone).

We do not plan to reaffirm and we are current so we are stay and pay (unless bank decides they do not want us to continue to live here). I am thinking about the stress of trying to move so quickly and still having to keep up the property. The rent sounded good especially since its been so long since we have had any extra (??????) money.

Are you going to lose the house to the trustee or is it exempt? If you are going to lose it, then lease to own is of no value as the trustee will sell it as quick as s/he can. I don't think you would be able to lease it when you tell them the trusteenis going to sell it. If you are going to keep it,then wait for discharge and closed before you do anything.

[jst4f]

I was not aware that the bank could foreclose post bankruptcy if you are current and insured. The concept of pay and stay says they can not foreclose. In principle, it is a punitive action by the bank for filing BK and I would think the BK judge would not be happy with the bank. It is contrary to getting a fresh start. I know the coarse points ofmthe law so maybe ther is something in the fine points I am missing.

[Drazil65]

The house is exempt under TBE, I did not file. We modified last year (2010) and have discussed with aour attorney the chance of the bank not letting us stay and pay as there is a clause in the modification (I think standard legal language) that states something about filing chp 7 and making the modification null and void. Our attorney said because we are current (never been past due on this debt) and have opted to pay and stay they should be ok with it. On the other hand, being the greedy banks that they are they may choose to foreclose right away and try to sell it for some of that equity, if they can sell it in this market, who knows. We will be moving in 2012 at some point anyway when husband graduates and we find out where he will be taking a position.

At this point, we are ok either way. We need to move forward and that is the plan!