Can I sell back the action home to the son of the foreclosed person?


#1

I have bought a couple of homes at the court steps and I kept them as rentals. Previous owners had move out already. The last home was still occupied. I talk to the owners and had agreed to move out. Then they mention their son was looking for a house and asked if I could sell him back their home. We agreed on a price and are moving forward with the process. He is getting an FHA loan. Now a friend told me that is not “legal” I can not flip the house. Is he right?


#2

I’m certainly not aware of anything illegal about it. You can even sell the house back to the prior owner themselves. The only problem that we run into in selling properties back to owners is that in that specific case the wiped out debt re-attaches. That shouldn’t apply to a sale to the son.
One thing I would do, however. Go ahead and file the unlawful detainer, and get a stipulated judgement, so that if they don’t close escrow you don’t have to start from square one - you simply file the judgement and call the Sheriff. This should also flush out whether the whole “son buying the house” thing is just a ruse to get some free rent.


#3

Sean, can you elaborate on the circumstances on which previously wiped out liens would “reattach”? My husband is considering buying my home (in my sole name) at a foreclosure auction. We assume the second loan would be wiped out but your comment concerns me. Thanks!


#4

You should talk to a knowledgable title officer familiar with the issue before proceeding. My guess is that it will come down to the particular laws of the state. For example in a community property state, like CA, you may run into problems down the road. I’m honestly not sure.