Caveat Emptor! Foreclosure Buy Back Mortgage Loans

Some people facing foreclosure on their homes can sometimes get too clever or too desperate and find themselves in a much worse place than just losing their homes. One of those places is getting scammed by a so-called real estate investor who offers the unfortunate home owner a foreclosure buy back mortgage loan.

In concept, foreclosure buy back mortgage loans sound great. They work by allowing the home owner to transfer ownership of the property to the investor, who then uses the equity in the property to buy other properties and make even more money. The previous home owner gets to live in the property and makes low rental payments to the investor until they can get back on their feet financially. At some later point in time, the previous home owner then has the option to buy the property back from the investor at a reasonable price. In theory, everybody is happy.

In reality, it can get ugly. If you do not completely understand the terms of the buy back agreement, you can find yourself in a situation where you not only lose your house, but find your family evicted and possibly placed deeper in debt than before. It usually starts with a person finding themselves in the foreclosure process. They then get targeted because foreclosure information is public. The agreement you have to sign requires you to sign the deed to your home over to the investor. The investor then promises you that they will pay off your outstanding balance and let you make low rental payments to them until you are ready to buy back the property from them.

Dishonest investors will usually say something different than what is in the written agreement. The problems begin with the fact that once you sign the deed over you have lost your house. Getting it back may become a major problem for you if the investor creates highly restrictive terms that make it impossible for you to buy it back, or for a lot more than you sold it to the investor for. The dishonest investor may not even pay off your remaining balance, and just use the remaining equity in the property to buy other properties. This leaves you with the bill since you are still listed as the owner of the home. This usually leads to you and your family being evicted, losing the house, and/or having to pay debts incurred by the investor. If you want to keep your house you will usually wind up having to pay a premium price for it as well.

While some honest investors may offer you this option, you must make sure that you have your lawyer investigate the deal and read any contracts before you sign them to make sure that your best interests are being served.

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