Lease option, Foreclosure, Marketing

I don't know exactly where to begin on this one because I should have been writing this every day as it happened, but I'll do my best.

So it all began in August of 2004 when we finished building the house in Springville. We put it on the market, expecting to be there for awhile. October 1, we received an advantageous offer for a lease option. The only negative was the closing date (October 15, only two weeks away) and the people that bought it (smokers without a great credit history). But, we accepted and then started looking for another house.

A friend of ours had to leave the state for a few months and said he would let us stay at his house at a discounted rate for a few months until he returned. We just needed a place to stay while we looked for our next deal so we gladly accepted. Well his temporary stay turned more permanent and he decided he wasn't coming back. We asked if he was interested in selling and he decided he would sell the house for what he owed. We agreed on a seller-financing option where I would cover the mortgage payments, earning the same principle that he was earning each month.

We decided to live there and list it for sale for $25 thousand more; then when it sold we would move and find another house. We ended up living there until May of 2006 when some friends of ours decided they really liked the house and were willing to pay a little more since they could buy it from us on a lease option. I had a three-year lease option to buy the house and so I resold the house on a two-year lease option. The deal stipulated that Ben, who we bought it from, would pay all of the closing costs and that Jorge, the new buyer, would also pay all of the closing costs, meaning that on top of the $25 thousand we could probably make another three thousand.

From there, we moved into a new house in a great area with a legal apartment and posted it for sale on the internet. We bought the new house for $217,000 and put down $5,000. We paid $1500 a month with $300 of the payment going toward principle reduction. Also, we collected $630 a month from the tennants below. That made our out of pocket expense $870 with over a third of that going to principal reduction.

In August of 2005 we started getting phone calls from Jorge saying he was getting foreclosure notes on his door and calls from people saying they could help. He was annoyed and wanted to know what was going on. I frantically called Benjamin, and he assured me that the house had gone into default through a bank error but he was making extra payments to bring it current. I decided to just buy the house outright so I wouldn't have to deal with the worry from Jorge. So I started the loan process and quickly got everything ready to go. When we requested a pay off amount, we found out the truth. Ben hadn't made payments in eight months (practically since signing the lease option agreement with us) and was getting close to foreclosure. What made matters worse is that the homeowners insurance hadn't been paid in over a year. They had placed a lien on the house and had gone to collections creating a hefty sum due because of all of the legal fees now tacked on. Ben now owed more than the house was worth, not to mention more than we had agreed I could buy it for. If Ben had made payments instead of living on the money I was sending him, he could have easily sold me the house for the agreed upon price.

Jorge moved out and called the police, not realizing that it is not illegal to lease option a house that is being bought on lease option (the permission is expressly granted in our contract). He just saw that my name wasn't on the title and thought I had fraudulently represented the situation. I rehearsed what had happened to the seargant that called (after I spoke with my attorney), and he got Ben's contact info and told me I should be fine but what Ben had done was a Felony.

The worst part of the situation, beyond the money and the inconvenience, was that I was caught in the middle of two "friends"---one who had repeatedly lied to me for months and had committed fraud against me, and one who no longer trusted me because he thought I was involved with the deceit.

So now we come to the present. I got an offer on the house I am in currently and sold it (cash out) for a profit of $18,000. We will also get the equity we have built up and the down payment, so it should equal a check for $26,000. We had the sellers pay half of the closing and now the buyers are also paying half of the closing, which means we shouldn't be out of pocket any closing costs. We were supposed to move on the first of December but the loan officer had some trouble with the conforming duplex. So after three appraisals and some fanagaling, we are supposed to be out in two days. The only problem is is that we have submitted a great short sale offer on the springville house, but the bank hasn't even assigned a negotiator to the file yet, even though it has been there for over a month.

To make matters worse my inlaws are coming on Monday for the holidays, and we were supposed to have already moved to Springville. So my family and I have to be out of this house the week before Christmas, and we have no place to live or host our parents! There are two hopes. One is that there is a miracle and Monday the bank assigns a negotiator, they love the offer, and we can close in a day (our loan has been out of underwriting for over a week). And the other hope is that we can rent the house from the people buying the house for at least until Christmas. I think the second scenario might be the closest to reality, but we could also end up living in a hotel with our stuff in storage. We have been packed for the last week, so we don't have to stress about that too much.

I'll keep you posted. I also need to write more about the day to day stuff, as well as my marketing, finding, and financing methods, which have proved invaluable. Oh, also how to have top notch legal representation for very little! Until next time . . .