Home »
Blog » Foreclosure Short Sales » Foreclosure Short Sales and Lease-Option Agreements in Arizona
Foreclosure Short Sales and Lease-Option Agreements in Arizona
October 16th, 2009 by 
Joseph Smith
Foreclosure short sales are becoming a popular option for distressed homeowners in Arizona who want to avoid foreclosure. But the option comes with a twist. The deal involves short selling the distressed home to an investor and then entering into a lease agreement in which the seller would purchase back the property from the buyer after three years.
Industry experts said that short selling with lease option is becoming a trend among distressed homeowners in Arizona. But they cautioned homeowners to approach the option with caution.
As an example, one homeowner purchased a house in 2004 for $300,000 which is valued today at about $200,000. Loan modification proved to be unsuccessful so the homeowner opted to go the route of foreclosure short sales with lease option.
Under the agreement, the troubled homeowner will sell his distressed property to an investor. But he will remain at his house as a tenant and pay rent to the buyer for 36 months. After three years, he has an option to buy back his house for $234,000, an increase of 130 percent compared to the sale price he was paid when he sold the property on short sale.
The lease-buyback option started to emerge in the area last year. Industry experts said that the option is a way for distressed homeowners to avoid foreclosure and at the same time remain in their properties. However, they said that the option is not for everybody.
Experts explained how a typical lease-buyback works. The financial situation and properties of troubled homeowners will be evaluated to determine if they qualify for the program. A home that will be entered on the program needs to meet the price and condition criteria of the investors.
Mortgage brokers will then meet with sellers to counsel them and evaluate further if they are eligible candidates for the home repurchasing program in three years. The investor will then make an offer for the property and to the bank.
If the negotiation proves to be successful, the seller needs only to sign a lease for three years, with an option agreement to purchase the house after 36 months.
Foreclosure short sales with lease-buyback option are illegal if sellers and investors are blood related.
