A new program claims to help distressed homeowners with a “Smart Sale Leaseback” program, but some experts warn to proceed with caution.
The program is fairly simple. A distressed homeowner, 60 to 45 days away from foreclosure, contacts a Realty Funding Partners (RFP) associate. They help the homeowner fill out an application for their Smart Sale Leaseback program for free.
Once they find out if they qualify they are paired up with a funding partner and RFP’s lawyers step in.
They buy the home from the bank at a high discount by negotiating the terms directly with the bank. They then lease it back to the original owner for much less than they were previously paying.
The homeowner decides if they want to sign a three-, five- or seven-year lease. At the end of their lease they have the option to buy back their home for 90 percent of the market value at that time.
The company also takes 60 percent of the payments they make on the lease and credits that back to the homeowner to go toward closing costs and to put more equity in the home.
“We want to spread the word that we have this program that can really help people,” said Mike Griffin of Realty Funding Partners. “This is a great program that does nothing but help people.”
Local real estate agents aren’t so sure.
Without speaking to employees of RFP, and by simply looking at the information presented on their website, Gordon Baker of Re/Max Alliance Group, and Allen Henderson, the Ahwatukee broker, say the numbers don’t add up.
Homes eligible for the program must have a mortgage of more than $200,000 and Henderson says the model the company is using requires a 3 percent market appreciation.
“I hope that will be happening in the near future, but it certainly isn’t happening in our current real estate market,” Henderson said in an email.
Doing the math for the average Ahwatukee home, Baker says he’s not sure how RFP makes any money if they do what they say.
“The math doesn’t work,” Baker said. “What if there is no appreciation? And assume they give no credit. Would they sell it for 10 percent less than they bought it at the end of three years? The more you look at it, it just doesn’t make sense. It may be good to ask them for different scenarios.”
Martha Baumgarner, a senior associate for RFP and an Ahwatukee Foothills resident, says the numbers work out because their goal is helping people, not making money.
Each situation is different, but the terms and rates are all worked out by qualified attorneys.
“We have private funding investors,” Baumgarner said. “There’s, obviously, money in it for them. They go to the servicing bank and they buy the mortgage for pennies on the dollar, just like a short sale. They’re negotiating with the bank for a much lower mortgage because these homes are so upside down.
“There’s an interest rate that’s very competitive, but each home is a different situation,” she continued. “We do not run credit checks because we already know they’re in a bind. The company makes money both on interest rate and on the fact that we as representatives are paid very little. That’s not the purpose. The purpose is to keep them in their home.”
RFP recently began a nationwide ad campaign to try to gain some awareness. Baumgarner believes they’ve helped more than 400 families stay in their homes nationwide since the program began. The program works for homeowners as well as business owners.
Baumgarner says with so many people foreclosing, she just wants to get the word out that she can help. Once the home is less than 45 days away from foreclosure, RFP can no longer offer assistance.
“The investors are bringing Wall Street to Main Street,” Baumganer said in an email. “We only operate in America, the investment is for our country. I am very pleased about this fact… As individuals there is no way we could accomplish what RFP has plans for.
“Investors all agree that property is a solid investment; I pray it never reaches another low like this again. It has been a tragic and toxic event for America. I believe this is a positive solution.”
Henderson offers just a little advice to anyone thinking about looking into the program.
“Regrettably, it is my opinion that Realty Funding Partners is not a solution for home owners in distressed properties…,” Henderson said. “Further, it is my opinion that anyone considering using Realty Funding Partners would be wise to confer with an attorney specializing in real estate law before signing any documents.”
Baumganer says she has done transactions with homeowners who did have an attorney present and in full support of the program. Realty Funding Partners is licensed in 50 states with the Attorney General, she said.
For more information about the program and how RFP may be able to help, contact Baumgarner at Martha@realtyfundingpartners.com or (602) 741-9102.
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