This situation is more common when a home is in foreclosure, but can happen anytime that a homeowner is under too much financial pressure and grasps at anything that resembles a solution. Sometimes, bad investors (buyers) will take the deed (take the property) and lease the home back to the homeowner, but never actually take over the loan, or pay the loan. The homeowner is then stuck – no longer owning the home, but still owing on the loan. You may not know if an investor is truly legit, but can prevent being caught in a bad situation by taking certain precautions:
Precautions to Take
- Look the investor up online. including any business or other aliases.
- Have a lawyer look at ALL the documents in the transaction (agreement, promissory note, deeds, etc.)
- Make sure the investor is taking over the loan outright by paying lender, OR
- That the agreement has a time-frame in which investor must take over, or else the deed reverts back to you, AND
- Agreement has a clause that says failure of investor to pay mortgage will cause deed to revert back to you.
If the investor is taking over the loan outright, confirm payment with lender before giving over the deed or keys. A lawyer can serve as a go-between for the exchange of funds for deed/keys. Trust me, the upfront cost of having an attorney oversee the process is nothing compared to losing your home plus your credit, and then being left still owing the lender.
If the investor is not taking over outright, call lender each month to verify payment of the mortgage. These are he main things you can do to protect yourself, your credit and your real estate. Remember, there are still good investors out there that can help prevent foreclosure and save your credit a little. You just have to find the right one.