Do you know what makes this Mike Roberts scheme tick? (BTW, He’s a 10-year member of the board of the CAR.)
Here’s one scenario:
Owner bought for $100,000 way back. HELOC’d out $400,000 since. Home is worth less than $500,000, say $450,000. Owner can’t make payments, is on a tight pre-foreclosure deadline, and doesn’t want bankruptcy or short sale on credit record.
Buyer can afford the payments on the owner’s current loans. Buyer doesn’t declare much of his income to the IRS, but can’t get a liar, er, stated income, loan quickly enough. So buyer takes over some or all of the loan payments, may or may not move into the home, and negotiates a fraction of the (assumed) gain on sale 5 years from now.
There’s extra tax stuff that may or may not be dodgy and important.
It seems to depend on the buyer assuming the home will appreciate by enough to pay off the loan value and repay the buyer’s share of the loan payments, plus hefty interest. In other words, the buyer depends on the market rebounding in 5 years or less. So these buyers are the same people buying in 2006 on a flip mentality who wouldn’t qualify for a 2007 loan. The price they pay to get in in 2007 is taking on the loan amount instead of the lower market value.
I’m sure Mike Roberts isn’t too distressed that this prevents a short sale that would (a) lower comps and (b) soak up some of the limited demand from people who actually qualify for 2007 loans.
Long may the (now more ingenious) flipper-driven boom continue! [/sarcasm]
