How Equity Purchasers Can Help Stop Foreclosure

When a bank initiates a foreclosure lawsuit or begins the nonjudicial process of notification, homeowners typically find themselves swamped by an avalanche of postcards and letters offering help. The most common type of assistance offer comes from companies willing to purchase the property for cheap and then sell it quickly or lease it back to the owners.

These types of companies are called equity purchasers, and they can operate in a number of slight variations. Homeowners who actually have equity in their properties are not the only ones to receive these types of offers, however, as the purchasers are usually willing to negotiate with lenders for short sales or loan re-structurings.

Equity purchasers specialize in purchasing single family residences at distressed prices and then either selling them quickly to turn a profit or negotiating with the foreclosing lender for more beneficial loan terms. In any case, the purchasers do not intend to keep the property for very long or even move into it.

In the most common form, the equity purchaser will offer the homeowners a few thousand dollars for the equity remaining in the property. They will also agree to attempt to work out a modification of the mortgage with the mortgage company, along with taking over the monthly payments from the current borrowers.

Often, this type of deal may allow the homeowners to remain in the property for a period of time after selling to the purchaser. This may be done under a leaseback option or a rent-to-own agreement. The homeowners will stop foreclosure and be allowed to keep living in their house until they can qualify for a mortgage to buy it back.

Some equity purchasers, though, will require that the owners move out of the house upon the closing of the sale. These are usually investors who wish to fix up the property and re-list it on the market quickly in order to generate the largest profit possible in the shortest amount of time. The owners will not be able to rent the property until they can purchase it back.

Homeowners who have their property currently listed for sale to avoid foreclosure will most likely receive offers from equity purchasers directly, rather than through their real estate agent. This is because the purchasers rarely want to pay the commission for the sale and would prefer to deal directly with the borrowers.

While there are many risks associated with selling the home to such investors, they represent another option for homeowners facing foreclosure who need a quick sale. While a leaseback may not be in every borrower’s best interests, being able to sell quickly and get out of a property before it is lost to foreclosure is definitely preferable to seeing the house foreclosed and auctioned off.

 

Author: Johnny

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