I am sure that all agents will come across this scenario, especially now with the economic conditions. Elderly parents deed their home that they own free and clear to all of their children. The elderly parents die, and one of their children want to keep the house, but due to the economy, they can’t qualify for a purchase mortgage. Their credit isn’t so bad that they could probably do a refinance in time. The problems is that the othe children want their share of the house, they may even need their share of the proceeds from the sale of the house.
What do you do? To me, who is NOT a mortgage NOR a legal expert, the best solution is for the siblings do do a private party mortgage to the sibling that wants to buy the house. It may cost a little money up front for an appraisal, inspection and the fees that the Title company wil charge to record the mortgage. I would even have the Title company take and handle the mortgage payments (where it is legal for them to do so).
The sibling that wishes to buy the house has a built in ownership equity. For example: there are 3 siblings, the house appraises for $200,000. The sibling that wants to buy the house would be in debt to the other two for $134,000 or 2/3’s of the value of the house. Once the sibling that is purchasing the house can qualify for a refinance loan, they pay off the mortgage that the other two siblings hold on the house.
This benefits those involved in that the two siblings can divide the mortgage payments for extra income, and if something happens that the one sibling can’t make the mortgage payments to them, they still have the ability to foreclose on their mortgage, and sell the house. Which keeps their financial interest somewhat safe. For the one buying the house, they have the opportunity to buy the house and live in it, enjoying all rights of ownership, and have that built in equity.
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