Purchasing Property after a Foreclosure with Seller Financing on FSBOs

If you’re a recent homeowner who has lost their property through foreclosure, give yourself some time to re-group. Know that all is not lost and there are still options for you to re-purchase a home. Start by looking a For-Sale-by-Owner (FSBO) listings and see if a seller would consider a lease option. More often then less, they will if the terms are right.


When you have found the right opportunity, try to work with a document consultant that has experience with purchase documents on FSBO transactions. A consultant typically charges a flat fee and it would be worth the cost to have all the necessary documents relating to the property before you commit to something that may cost you more down the line.

The consultant is not acting as an agent in this transaction, they could only provide support by helping the buyer and seller with obtaining the documents needed to effectively disclose the condition of the property, like the appraisal, preliminary title report, home inspections reports, pest reports, roof reports, etc. As with an buyer, you would want to have all the necessary documents on the property before you commit to a long term agreement.

If the seller agrees to the terms, there will typially be a non-refundable deposit required. Remember, the seller is removing the property from the market to accommodate the lease option. The fee for this accommodation will typically be this deposit. On most FSBOs, the seller will also require the buy to assume all cost of any upfront reports on the property.

If you are a buyer and you would like to present an offer to a seller for a lease with the option to buy, start by asking the seller if they will consider this option. If so, be prepared when presenting your offer and application. A document consultant could also assist with this process as well.

So, if you have been a victim of the recent foreclosure crisis, this process can put you back in position to purchase a home. Some loan programs like through FHA required that you have re-established credit for 2-3 years after a foreclosure. This is in addition to maintaining steady employment, have the required reserves which is 2-6 months of your current proposed monthly payments, plus the amount of any closing cost.

Have your receipts for all payments make to the seller during the lease period. Avoid paying anything in cash. Handwritten receipts are not acceptable in most cases. So, make sure that you have bank receipts (cashiers check or money order) that can be verified. Copies of your cancelled checks will be acceptable.

Provided that everything else is in place, you should have a clear path to loan approval. The most important thing when getting financed is your documentation and that everything can be verified. All payments made to the seller during the lease period are part of your payment history and is part of re-establishing your credit.

This Article was written by Eva Black, a licensed real estate agent with over 23 years of experience in mortgage lender, real estate sales and loan consulting. Specializing in Consulting For Sale Buy Owner Purchase Transaction Servicing the Greater San Francisco Bay Area




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