Posted on: 11th Dec, 2007 07:19 pm
Hi, my husband and I live with my mother and step father. Both have serious addictions that have caused them to get into deep financial difficulties. My husband and I have been thinking that we might like to buy the house from them, but we would buy it, we don't want to take over their mortgage as their credit rating is terrible, and their interest rate is ridiculously high. However, this house is worth a lot less than it was when they bought it, and the remainder of their mortgage is still quite high. We would want to buy it at a lower price than they purchased it for. But we're worried that since they still owe so much the mortgage company might get suspicious if they sell the house cheaper to their daughter and son in law. Are there any options here?
Hi Tathiela,
Welcome to the forums.
It's good that you guys wish to buy the home from them but isn't there any way you can help them lead better lives? May be then they'll be able to pay off their debts and you need not worry about it.
By the way, if you want to buy the home, you can convince them that they'll be able to pay off part of the mortgage. But I'm not sure as to what they'll do about the rest because as you say, the house isn't worth the price they bought it for. Moreover, they won't be able to pay for the deficiency (balance - current sale price) also. And, as far as the company is concerned, they should be informed before your parents sell the property to you. At the most, the company might forgive the deficiency amount but the IRS won't leave them; they'll have to pay taxes probably.
What I shall suggest is, you set up a lease purchase option with yur parents right now. If at all you want them to pay off the loan, currently become tenants on the property and pay the monthly rent. With that amount, your parents might be able to make monthly loan payments. And, after they pay off the property, you can buy it as well. But inform the lender about the lease purchase option or else you may land up in trouble later.
Take Care
Welcome to the forums.
It's good that you guys wish to buy the home from them but isn't there any way you can help them lead better lives? May be then they'll be able to pay off their debts and you need not worry about it.
By the way, if you want to buy the home, you can convince them that they'll be able to pay off part of the mortgage. But I'm not sure as to what they'll do about the rest because as you say, the house isn't worth the price they bought it for. Moreover, they won't be able to pay for the deficiency (balance - current sale price) also. And, as far as the company is concerned, they should be informed before your parents sell the property to you. At the most, the company might forgive the deficiency amount but the IRS won't leave them; they'll have to pay taxes probably.
What I shall suggest is, you set up a lease purchase option with yur parents right now. If at all you want them to pay off the loan, currently become tenants on the property and pay the monthly rent. With that amount, your parents might be able to make monthly loan payments. And, after they pay off the property, you can buy it as well. But inform the lender about the lease purchase option or else you may land up in trouble later.
Take Care
Hi Tathiela,
I totally agree with Sara. If you buy the house that will not help your parents much as you don't want to assume the mortgage.
I think lease to purchase is a good option. That will help your parents to pay off the mortgage and you can also get the ownership of the house eventually.
Thanks,
Larry
I totally agree with Sara. If you buy the house that will not help your parents much as you don't want to assume the mortgage.
I think lease to purchase is a good option. That will help your parents to pay off the mortgage and you can also get the ownership of the house eventually.
Thanks,
Larry
Hey,
We're not really THAT interested in "helping the parents" that much, they're beyond help. We've tried that, and even IF we'd pay them monthy, it's not sure that the money we'll pay them will actually be paid towards mortgage by them... Also, they'd make the shittiest landlords you could possibly imagine.
In addition to that all.... The monthly mortgage costs they're paying at this moment are outrageous because #1.. they paid too much for the house, it's only worth 2/3rd of what they paid for it.... and #2.. they have REALLY bad credit.
Paying them as you both suggested would AT LEAST cost us TWICE the money it would cost us to pay mortgage of our own
There are 2 possibilities here.
#1: we move to an apartment and so do they.. The house would HAVE to be sold for about 2/3rd of what they currently owe the mortgage company, because it's simply not worth more (i'd be suprised if they even got that much...) In this case everyone is worse off, and we'd lose the house...
#2: They move to an apartment (they told us they want this) and we buy the house from them for what it's worth at the moment (still WAY less than what they owe the mortgage company... but again, it simply isn't worth more..).. we keep the house
Obviously we want to go for option 2, but we're not sure about our legal possibilities... Any advice on that?
Thanks in advance
We're not really THAT interested in "helping the parents" that much, they're beyond help. We've tried that, and even IF we'd pay them monthy, it's not sure that the money we'll pay them will actually be paid towards mortgage by them... Also, they'd make the shittiest landlords you could possibly imagine.
In addition to that all.... The monthly mortgage costs they're paying at this moment are outrageous because #1.. they paid too much for the house, it's only worth 2/3rd of what they paid for it.... and #2.. they have REALLY bad credit.
Paying them as you both suggested would AT LEAST cost us TWICE the money it would cost us to pay mortgage of our own
There are 2 possibilities here.
#1: we move to an apartment and so do they.. The house would HAVE to be sold for about 2/3rd of what they currently owe the mortgage company, because it's simply not worth more (i'd be suprised if they even got that much...) In this case everyone is worse off, and we'd lose the house...
#2: They move to an apartment (they told us they want this) and we buy the house from them for what it's worth at the moment (still WAY less than what they owe the mortgage company... but again, it simply isn't worth more..).. we keep the house
Obviously we want to go for option 2, but we're not sure about our legal possibilities... Any advice on that?
Thanks in advance
Hi Tathiela,
I can understand the situation here. So, your parents aren't such that they can pay off the mortgage comfortably, and even if you pay them the rent, there's no certainty as to whether they won't use it on their addictions. In such a case, if keeping the house is your priority then well, you can go for the second option. But will they be able to buy the apartment because they would probably use the sale proceeds of the house to pay off the mortgage? And, even if they buy, what about the deficiency, I mean the difference between the loan balance and the sale proceeds.
The lender may file a deficiency judgment in court and try to retrieve that amount. So, in that case, if you wish to keep the house, you'll have to be prepared for that.
However, you can request the lender to charge off or cancel the unpaid debt (the deficiency here) but then he might want adequate proofs to convince him that neither you nor or your parents are financially capable of paying off the debt any more.
All these apart, first of all, you and your parents need to sit with the lender and explain it to him as to why your parents will sell off and transfer the house to you – give him a logical reason because if there's a mortgage involved, lenders at times don't agree to a transfer of title as they have a security interest in the property who's title is being transferred.
Regards,
Jessica
I can understand the situation here. So, your parents aren't such that they can pay off the mortgage comfortably, and even if you pay them the rent, there's no certainty as to whether they won't use it on their addictions. In such a case, if keeping the house is your priority then well, you can go for the second option. But will they be able to buy the apartment because they would probably use the sale proceeds of the house to pay off the mortgage? And, even if they buy, what about the deficiency, I mean the difference between the loan balance and the sale proceeds.
The lender may file a deficiency judgment in court and try to retrieve that amount. So, in that case, if you wish to keep the house, you'll have to be prepared for that.
However, you can request the lender to charge off or cancel the unpaid debt (the deficiency here) but then he might want adequate proofs to convince him that neither you nor or your parents are financially capable of paying off the debt any more.
All these apart, first of all, you and your parents need to sit with the lender and explain it to him as to why your parents will sell off and transfer the house to you – give him a logical reason because if there's a mortgage involved, lenders at times don't agree to a transfer of title as they have a security interest in the property who's title is being transferred.
Regards,
Jessica
Hi,
They wouldn't BUY an apartment, they'd rent it. So there wouldn't be any issues there.
You're talking about "transferring" the title of the house, but wouldn't it be easier to just sell the house to us like they would sell it to any other individual/family? This way we can buy the house for what it's really worth, and we won't have to deal with any of the issues they had with the mortgage company (we'd switch to a different mortgage company for sure).
We'd have plenty of proof that my parents aren't able to pay the mortgage as it is.. We've just recently gone through a near-foreclosure where they had to take money out of one of their 401k's in order to actually be able to pay the mortgage (and lawyer fees)..
Basically.. What are the possibilities that we will be treated as normal buyers, other than their daughter and son in law? (as in.. just buy the house for what the appraisal says it's worth, and don't have to deal with their problems)
They wouldn't BUY an apartment, they'd rent it. So there wouldn't be any issues there.
You're talking about "transferring" the title of the house, but wouldn't it be easier to just sell the house to us like they would sell it to any other individual/family? This way we can buy the house for what it's really worth, and we won't have to deal with any of the issues they had with the mortgage company (we'd switch to a different mortgage company for sure).
We'd have plenty of proof that my parents aren't able to pay the mortgage as it is.. We've just recently gone through a near-foreclosure where they had to take money out of one of their 401k's in order to actually be able to pay the mortgage (and lawyer fees)..
Basically.. What are the possibilities that we will be treated as normal buyers, other than their daughter and son in law? (as in.. just buy the house for what the appraisal says it's worth, and don't have to deal with their problems)
Tathiela, it is apparent that you know what you want to do - the only thing is HOW to do it. Purchasing is the proper way to do this transaction, but your parents' mortgagee may not be amenable to letting the house go on a short sale. Clearly, someone must discuss this with the bank so that your desire to purchase can be fulfilled.
You would definitely be treated as normal buyers, though this would be what is considered a "non arms-length transaction." By that, I mean that the sellers of the property are not strangers, but relatives. A lender that is wise will simply be careful in how this transaction is handled, and there are some lenders who will decide not to get involved - especially if this is truly a bailout of a pending foreclosure.
The primary difficulty in this scenario is that you won't be paying a high enough price to repay their mortgage in full, and that is why the mortgagee's input is so critical to the deal. You will need to cross that hurdle before you move forward.
You would definitely be treated as normal buyers, though this would be what is considered a "non arms-length transaction." By that, I mean that the sellers of the property are not strangers, but relatives. A lender that is wise will simply be careful in how this transaction is handled, and there are some lenders who will decide not to get involved - especially if this is truly a bailout of a pending foreclosure.
The primary difficulty in this scenario is that you won't be paying a high enough price to repay their mortgage in full, and that is why the mortgagee's input is so critical to the deal. You will need to cross that hurdle before you move forward.
Hi,
They wouldn't "bail" out of foreclosure, we already fixed that problem for them..
See.. let me explain the situation a bit better..
Both parents are REALLY irresponsible, and don't make that much money at all... Basically, the mortgage they pay at the moment is WAY over 1/3rd of their income... In addition to that they have bought a car 2 years ago, which lease is also REALLY high.. Then there are the electricity bills, phone bills. etc. etc.
Practically, the only way they could keep their heads up is by ONLY paying bills, and buying groceries really carefully. When the foreclosure process was started a couple of months ago... we (me and my husband, as in, the kids) decided it was enough... and we took charge of the finances.. This has lead to a lot of arguments, bad moods, and more bad things... But.. we did get them out of foreclosure, and are catching up with bills too.
Obviously we (and them) can't do this forever... And the second we stop doing this, they'll be getting the same problems back.. so no matter what, the house will have to be sold..
Now you say "The primary difficulty in this scenario is that you won't be paying a high enough price to repay their mortgage in full, and that is why the mortgagee's input is so critical to the deal. You will need to cross that hurdle before you move forward."
The thing is... Nobody will pay enough for them to repay their mortgage in full, because the house is in bad condition.. When they bought it 2 years ago they got it appraised for 40,000.- They paid 59,000.- back then, because they didn't get it appraised before they bought it (stupid!).... and now the house is in even worse condition than it was 2 years ago... The outstanding balance is still roughly 57k
I appreciate the advices you guys have given us, i hope the above explanation will be useful..
They wouldn't "bail" out of foreclosure, we already fixed that problem for them..
See.. let me explain the situation a bit better..
Both parents are REALLY irresponsible, and don't make that much money at all... Basically, the mortgage they pay at the moment is WAY over 1/3rd of their income... In addition to that they have bought a car 2 years ago, which lease is also REALLY high.. Then there are the electricity bills, phone bills. etc. etc.
Practically, the only way they could keep their heads up is by ONLY paying bills, and buying groceries really carefully. When the foreclosure process was started a couple of months ago... we (me and my husband, as in, the kids) decided it was enough... and we took charge of the finances.. This has lead to a lot of arguments, bad moods, and more bad things... But.. we did get them out of foreclosure, and are catching up with bills too.
Obviously we (and them) can't do this forever... And the second we stop doing this, they'll be getting the same problems back.. so no matter what, the house will have to be sold..
Now you say "The primary difficulty in this scenario is that you won't be paying a high enough price to repay their mortgage in full, and that is why the mortgagee's input is so critical to the deal. You will need to cross that hurdle before you move forward."
The thing is... Nobody will pay enough for them to repay their mortgage in full, because the house is in bad condition.. When they bought it 2 years ago they got it appraised for 40,000.- They paid 59,000.- back then, because they didn't get it appraised before they bought it (stupid!).... and now the house is in even worse condition than it was 2 years ago... The outstanding balance is still roughly 57k
I appreciate the advices you guys have given us, i hope the above explanation will be useful..
Hello Tathiela,
If you consider the case as a normal buying-selling transaction at the present price of the property, then your parents have to do a short sale to you. If the lender seeks deficiency judgment for the unpaid mortgage balance, then your parents shall remain responsible for that.
I think you should talk to the lender first and then take necessary steps.
If you consider the case as a normal buying-selling transaction at the present price of the property, then your parents have to do a short sale to you. If the lender seeks deficiency judgment for the unpaid mortgage balance, then your parents shall remain responsible for that.
I think you should talk to the lender first and then take necessary steps.
That was me in the post above. Forgot to log in.
i am incredulous that your parents were able to obtain a mortgage for an amount higher than the actual value at the time they purchased the home. oh well.
thanks for the explanation of the situation regarding the past-dues, etc. it makes a lot more sense now.
unfortunately, as jenkin also pointed out, you must deal with the lender in this case if the property is to be sold to you. because their mortgage is in place, they are within their rights to call the entire debt due in full, as opposed to authorizing the sale to you.
this is a mess, no doubt. you will need to pray that the lender is reasonable in dealing with the situation; as jenkin also pointed out, any deficiency would be against the current owners (your parents), so if the lender is open to the short-sale, you would only need to concern yourselves with what you need to borrow to do the job.
another thought...perhaps if you work out the borrowing details with that same lender, they might be more open to the idea, since they would then at least recoup some money from the interest paid on the new mortgage. and, of course, they would need to charge market rate, as it wouldn't make sense for you to borrow at a higher rate than you can obtain elsewhere.
sorry for the overly long response..i guess i just had a lot to say, huh?
thanks for the explanation of the situation regarding the past-dues, etc. it makes a lot more sense now.
unfortunately, as jenkin also pointed out, you must deal with the lender in this case if the property is to be sold to you. because their mortgage is in place, they are within their rights to call the entire debt due in full, as opposed to authorizing the sale to you.
this is a mess, no doubt. you will need to pray that the lender is reasonable in dealing with the situation; as jenkin also pointed out, any deficiency would be against the current owners (your parents), so if the lender is open to the short-sale, you would only need to concern yourselves with what you need to borrow to do the job.
another thought...perhaps if you work out the borrowing details with that same lender, they might be more open to the idea, since they would then at least recoup some money from the interest paid on the new mortgage. and, of course, they would need to charge market rate, as it wouldn't make sense for you to borrow at a higher rate than you can obtain elsewhere.
sorry for the overly long response..i guess i just had a lot to say, huh?