RomRaider

We've been trying to sell our old house unsuccessfully for just about forever now and we've received an offer for a bond for title loan. I can't find anything about it on the internet but it just seems like a bad idea.

The facts:
The buyer will pay all closing costs and realtor fees and pay the mortgage payment to us. The loan stays in our name until they are able to obtain a mortgage for themselves. The cost of closing and paying realtors plus what we still owe on the house would be right around or maybe even a bit more than our asking price, so all risk aside, it would be a good deal for us.

But what are the risks? Can they be reasonably mitigated? Before I even consider this or bother talking to a lawyer (which we'd obviously do, to have them draft a contract), I want to get a better idea of what I'd be getting myself in to. Worst case, I see them never making a single payment to us and tearing up the house. I've never met these people so the one thing I know about them is they don't have good credit. What can we do with this contract to make sure they pay? What about a deadline on when they can get their own mortgage?

The house is 1000 miles away from where we're living now so I'd definately like to get it sold ASAP. We've been paying 2 mortgages for 8 months and now on top of that we've spent about half our annual salaries in the last month to repair our (new) flooded house. I'm already pretty down on this idea but I'd like to know more before I rule it out. So you don't need to talk me out of it, but if you know of anyone that's done this or of any aspects I don't know, I could use the advice. I've already completely ruled out just renting the house out, and this seems pretty similar to that.

The pros:
-Title stays in our name
-It's more money than we'll get unless there's a huge turnaround in the housing market
-We (effectively) get rid of a mortgage payment
-Our credit continues to get better until they buy out the mortgage

If the title stays in your name and the mortgage stays in your name, then isn't this essentially a lease-to-own arrangement?

Basically, except (I just heard from the realtor -- this whole deal and the way they do it is pretty tailored to Alabama) we give them a year or two to finance it themselves. My understanding is that we might as well give them two because they'll be invested enough at that point to make backing out silly. If they back out at any point they're out everything they've paid. They're responsible for all the maintenance and we can set up an escrow that automatically defaults them if they are xx time overdue on payments.

Found another pro -- it's pretty much customary to charge a bit over the current interest rate. So say we went with 6.75%, we'd be making money on interest as we're only paying 5.5.

Edit: Also, the realtor told us a bit about these people and they seem to be about the most attractive poor-credit people to deal with that we could hope for. At least in the words of someone who would profit from convincing us.

The disadvantage is that you can't sell the house for 2 years and get it off your hands. Instead, you have to rely on these people, who already have crappy credit and probably can't even rent a house, to build up their credit, which might never happen. Then you are back where you started. It doesn't matter if they are motivated or not if they've been making payments for 2 years - if they can't get a loan -> it doesn't matter. And lenders, obviously are tightening the reins big time.

I'd also make sure that your homeowner's insurance still covers the house if they do something stupid with this arrangement.

With loans being harder and harder to get, you may have to do that to get your house sold. Use a lawyer, not a Realtor. You want all conditions in writing so if they do not pay you can kick them the hell out. It is how my mother bought her house (she had pretty bad credit). She payed it off in 10 years and 20 was left on the note. The bad thing for her was that those payments never went on her credit report.

You end up signing a warranty deed with restrictions. It is the way they do it in Texas at least.

too me it sounds like a good idea. A credit rating is a bitch and I have made mistakes in my past too. I think that is a fair way as long as it goes through for the people.

If they stop paying it could be a huge headache. Eviction takes time and I'm sure it is an ugly process. I think here in Indiana it takes something like 60 days notice to kick someone out of a home or rental even if they're not paying. Even if it is just 30 days you've got a huge headache on your hands. They could trash the place on their way out, too. And if they have no money it won't do any good to sue them afterwords.

What if, say, they pay $200 less than due for 3 months in a row? What are you going to do? What if they call and beg you not to kick them out and give you a sob story about their kids, etc? Do you want to go through that? I'd keep the worst case scenario in mind.

Yeah, I definately know how bad it could go. That's why I've never even considered renting it out. But we can't afford to sit on it forever and I don't see the housing market in Montgomery getting better any time soon. We left in October and haven't had a single offer yet. We've dropped our asking price 10k. I've seen what a bad tennant can do to a house though, and I don't want it to happen to me.

Yeah it may be no worse. I'm just trying to play devil's advocate. I can't say I know what I'd do in your shoes. With the housing market in most areas now you may not be able to find the perfect buyer.

I'd at least make some sort of risk assessment. How much do you have to lose if you get screwed in the worst possible way, multiplied by a risk number (may be difficult to conclude, .25? .5? .05?). Think you could sell the house straight up if you dropped the price that much?

The only other comment I have is you mentioned the realtor said something to the affect of the buyers being the "most attractive poor-credit people." Is this realtor your seller's agent, their buyer's agent, or an 'independent' party? Keep in mind the bias there based with whom the realtor is invested. You want to get advice from someone who *only* has your best interests in mind. Is this a NAR "Realtor" (with the capital R) or otherwise licensed?

That was the buyer's agent (and our previous realtor, who we dumped a couple months ago to try someone else). But those weren't her words, that's an accurate description of the buyers -- based on what the realtor told me. So I'm definately not putting too much stock in it. I did find out the address the people were living at before so I could have some friends drive by it and tell me how it looks. Did they keep it up? Would you want the people that had been living there to rent your house?


Not familiar, but both their realtor and ours are working for legitimate companies and have been in the business for many years.

+1 on the lawyer. A good real estate lawyer will save you huge headaches, especially if you are selling yourself or entering a non-conventional arrangement such as that.

You could do a little background checking yourself if you can get names and birthdates.
http://www.criminalsearches.com

If you're not getting offers, either the price is too high or the market is too slow... Consider dropping it every month, or something like that, to find out what people are willing to pay.

The market is pathetic. We've dropped the price 10%. Meanwhile houses that are worth less have been selling for more.