Legal Question in Real Estate Law in California

Re: Foreclosures

Your question does not make any sense. Are you buying the property from him, and then renting it back? Then you have either paid off the lender or they could exercise a due on sale clause.

The lender wants their money, and nothing you will do can remove their security.

Re: Foreclosures

Absolutely not, but this is a sophisticated transaction and should be done very carefully and with advice of a real estate attorney who is expertise in this area. The terms and conditions should be spelled out very carefully. Understanding that the gentleman/lady is in default you should understand why they are in default. If they get behind in their monthly payments on the lease that will cause greater problems in the application of the option portion. Therefore this must be discussed fully with the attorney to understand completely the ramifications of this kind of transaction.I have been practicing law in the San Francisco Bay area for approximately 35 years and expert in the area in the category in which your question is placed. I feel I can help you in this matter and if you wish to consult with me please contact me at 925-945- 6000.

Re: Foreclosures

I assume you are not also the lender. If you were, the laws governing "deed in lieu of foreclosure" would apply.

Buying properties in foreclosure (or threatened with foreclosure) is an old and well-established method for investing or speculating in real estate, and generally legal.

There is, however, a special class of foreclosure-home purchaser that gets special legal attention: the so-called home-equity purchaser. Civil Code section 1695.1 defines an equity purchaser as one who acquires title to a residence in foreclosure EXCEPT one who will use such property as a personal residence, who buys by deed in lieu of foreclosure, from a relative, or at the foreclosure sale itself.

Typically, a home-equity purchaser follows pending foreclosure sales through public records. A few weeks before the scheduled foreclosure sale, the purchaser approaches the defaulting homeowner and offers to buy the owner's position for a fraction of his equity, take over the payments, rent to the former owner, and (usually) give him an option to buy it back in a year or two. This sounds like what you're proposing.

This is also legal, but somewhat regulated.

First the seller has a right of rescission, i.e. ha can cancel within five business days or the morning of the scheduled foreclosure sale, whichever occurs first.

The equity sale contract must contain several special notices in large, bold print.

The equity purchaser cannot make any false or misleading statements to the homeowner/seller.

If any of this may apply to your deal, you need to study Civil Code sections 1695 through 1695.17 very carefully, and/or consult with a local real-estate lawyer.

A due-on-sale clause in the defaulted loan agreement is unlikely to be of any concern, since with foreclosure under way, the loan is all "due" anyway.

Finally, keep in mind that any below-market sale, exchange or gift of property might be challenged as a fraud on a creditor if the transaction has a negative impact on a creditor's security, rights or access to collateral.