Slipper Posted May 9, 2013 Share Posted May 9, 2013 My mother and step-father want us to purchase their home (they have financial problems). They own a large 1-bedroom home with some out-buildings for storage a small guest house and around 20 acres. They've offered to sell it to us for $75,000 (the amount of the mortgage they owe on it). I'm not sure what the appraisal is for, but I feel certain it's over $100,000. Financially it's a good deal. Additionally it adjoins our property which would allow us to have one large plot of land. (The downside is that they would retain life estate - they are both retired - until they die so we couldn't use the main house until then). My step-father is sneaky (and just a bit shady and a chronic liar). I really want the land (it's been in our family for quite a while) but I have to triple check everything he says. The mortgage payments are unusually low, less than $400 a month. Yesterday, the subject came up and he said that he wanted us to make a commitment in the next 60 days and go ahead and sign. They stated that the reason for the urgency is that they want to be able to commit to traveling and other fun things but can't until this is decided. I know I need to see an attorney, but I'm trying to figure out what sneaky thing is heading my way before I see an attorney. (And I'm definitely using my own attorney, not a 'together' one for this). In our discussion, he suggested that we send the payments to them and they would continue to pay since nobody can assume the mortgage due to the contract. He also mentioned briefly that in a few years we would need to make a larger payment for a balloon payment or we would lose everything. My thoughts were to take out a loan on our existing property and pay off their mortgage since I'm not comfortable sending them the money to pay for the mortgage. He said that wouldn't work but didn't say why. Is there a pre-payment penalty on balloon mortgages? (And again, I'm definitely having an appraisal and my own attorney. This is family property. If it can work out, I really want it. If it doesn't work out, I'm okay with walking away.) I feel like there's more going on behind the scenes (and this was a mortgage taken out just a couple of years ago, which also didn't make sense). The reason for needing the $75,000 mortgage was so people couldn't sue them and take their house. My step-father said that if someone knows a mortgage is on the house, they won't try to take it. That just seemed like a lot of money and I advised my mother against it, but she followed my step-dad's advice. I know little about balloon mortgages. What can anyone tell me about them and what I'm wandering into with this situation? Quote Link to comment Share on other sites More sharing options...
Parrothead Posted May 9, 2013 Share Posted May 9, 2013 No, don't give them money. If they want you. To buy, you get a loan, have the house and property put in your name with a trust saying they can live there until death. You pay your loan, not their balloon mortgage. Quote Link to comment Share on other sites More sharing options...
LifeLovePassion Posted May 9, 2013 Share Posted May 9, 2013 Balloon mortgages are typically due 10-15 years after they are taken out. You pay your (lower) mortgage payment based on a 30 year loan, then when the balloon is due you have to pay the balance off by refinancing or selling. I would buy the property and get it deeded in my name before they got any money. There may or may not be a prepayment penalty. So, then they want to live there rent free until they pass away? You have to decide if you don't want access to the rest of your property for however long that may be. Who would be trying to take the house anyways? That doesn't make sense. Quote Link to comment Share on other sites More sharing options...
Mommyof4ks Posted May 9, 2013 Share Posted May 9, 2013 Wow, you need a good lawyer, and I would not sign anything without having the lawyer go over it. Laws vary so much by state, and there are so many little things that can make a seemingly good situation go bad, so you are wise to be cautious. Quote Link to comment Share on other sites More sharing options...
xixstar Posted May 9, 2013 Share Posted May 9, 2013 Sounds like a horrible idea all around. I would tell them you're willing to buy the house/property properly (mortgage etc in your name) and will set up a specific rental agreement for them (it can be rent free but still outline whatever needs to if they drive you nuts). But this is because you paint a huge lack of trust in this relationship with your stepfather. If they're not interested, then leave it be. I would not entangle myself in any other way than owning the property properly unless you just want to start paying your parents mortgage for a few years out of the kindness of your heart. Quote Link to comment Share on other sites More sharing options...
elegantlion Posted May 9, 2013 Share Posted May 9, 2013 Well "people" who are owned money do take homes. Sometimes they put liens on the home and wait until it's sold. I wouldn't proceed one iota until I was sure there were no liens on the property. I also wouldn't give him a dime and expect him to pay the mortgage. If it's family land and means a lot, I would buy it from them, creating your own mortgage and removing every remnant of his name from the deed. His sneakiness could be a lien, could be they are close to being foreclosed, could be he wants to walk away and will take your "rent" money to use it for what he wants. Buying it from him would be the only way I'd proceed and I wouldn't do that until I knew every detail about the financial situation of the property. Quote Link to comment Share on other sites More sharing options...
Guest Posted May 9, 2013 Share Posted May 9, 2013 Sounds very odd to me. You've been given great advice so far. Quote Link to comment Share on other sites More sharing options...
Soror Posted May 9, 2013 Share Posted May 9, 2013 I agree with Parrothead if you do the deal I'd go through the bank for an official loan. Also, fwiw we had neighbors who had a business lien on their house and property, the business went under and they lost the house. If he has a lien on the house I'd guess it is likely illegal for him to sell it to you, which is why he doesn't want to do it officially, in which case you could end up really losing your butt. I would certainly not put it against my own home. Bad, bad idea and that is not even getting into the balloon issue, which I wouldn't due separate from the family issue. Quote Link to comment Share on other sites More sharing options...
LifeLovePassion Posted May 9, 2013 Share Posted May 9, 2013 You should close on the home with an attorney or title company who will search the property records to make sure there aren't other liens on the property. Quote Link to comment Share on other sites More sharing options...
Night Elf Posted May 9, 2013 Share Posted May 9, 2013 I'm sorry you can't trust your stepfather and that your mother must not know what is going on. It sure seems shady to me. He's making it sound so easy which raises red flags for me. Quote Link to comment Share on other sites More sharing options...
StaceyinLA Posted May 9, 2013 Share Posted May 9, 2013 Absolutely see a lawyer and have a title search done. If they owe anyone, there will be a lien on the property that will show up in the title exam. If all is clear, take out your OWN mortgage and just set up a trust or long-term "lease" for them until death so they can live in the house, but you still have use of the property. Balloon mortgages shouldn't have a prepay penalty, but I'd certainly not make a balloon note. Rates are amazingly low, so you should get a great rate on a regular mortgage. Quote Link to comment Share on other sites More sharing options...
speedmom4 Posted May 9, 2013 Share Posted May 9, 2013 Please don't take my comments as harsh. I only mean them as a warning. Walk away from this deal. Please do not consider getting a mortgage on your existing property to pay off their mortgage. You will be putting your own family in jeopardy. Is your home already paid off? Your intuition is already telling you something isn't right. Wait six months to a year and see what happens. If you gather more information you may find that it is a good option but more than likely your suspicions will be uncovered. Do you plan on letting them live rent free? If not are you prepared to send them packing if they don't pay the rent? Becoming a landlord to your mother and stepfather will change the relationship. Please walk away from this!!! Elise in NC Quote Link to comment Share on other sites More sharing options...
Slipper Posted May 9, 2013 Author Share Posted May 9, 2013 I appreciate all of the comments so far. I understand that family and business deals do not mix well, but we've done several (and they are typically rocky) so I'm willing to chance that it will change the relationship. We currently have no debt (house, car or credit card). My husband wants to acquire the land around us (which also makes me happy since I have a lot of love for where we live) and our plan was to do it in small increments since we have no other debt and can avoid a lot of interest by paying it off quickly. I know there's a mortgage on it. But, I think everyone is right and something is off about it. I'm making notes as I read your replies. Thanks for everyone's input. I'm still listening if anyone has anything else to add. Quote Link to comment Share on other sites More sharing options...
PinkyandtheBrains. Posted May 9, 2013 Share Posted May 9, 2013 No, don't give them money. If they want you. To buy, you get a loan, have the house and property put in your name with a trust saying they can live there until death. You pay your loan, not their balloon mortgage. If they sincerely want you to buy the property they will not balk at you doing this. Quote Link to comment Share on other sites More sharing options...
alef Posted May 9, 2013 Share Posted May 9, 2013 From your post, you don't feel confident to proceed and I think you are right to hesitate. If you proceed, be very, very, cautious, and definitely check for liens or other potential problems--and don't even consider the purchase unless you get your own mortgage on the property. Honestly, if you don't trust a person would you really want them living in a home you own? This just doesn't sound like a good deal in the long run. Quote Link to comment Share on other sites More sharing options...
Crimson Wife Posted May 9, 2013 Share Posted May 9, 2013 He might be planning to take the money and spend it rather than passing it along to the mortgage servicing company. IF you choose to buy the property, do a regular sale where you get a mortgage in your name to pay off the previous loan. Definitely run a title search to make sure the title is clear. Quote Link to comment Share on other sites More sharing options...
elfgivas Posted May 9, 2013 Share Posted May 9, 2013 know when to walk away, know when to run... but if you want to do it, pay money for a lawyer, and perhaps a real estate person, too. and fwiw, i would buy it and rent it back, for whatever that property would go for in rent (like $800 a month?) that you will forgive (ie they will live rent free), but that would kick in if you and/or dh were injured/unemployed, etc. but check like a crazy person for liens.... something is just not right... congrats on being debt free! ann Quote Link to comment Share on other sites More sharing options...
poppy Posted May 9, 2013 Share Posted May 9, 2013 Walk away unless they are willing to let you actually own the property you will be paying off. Quote Link to comment Share on other sites More sharing options...
OrganicAnn Posted May 9, 2013 Share Posted May 9, 2013 loan rates are still very low. I'd get your own loan. I think they want you to pay their mortgage, while not sell the land to you. If they sell the land to you, then they would have to pay off the mortgage. You can't sell the collateral for a loan and keep the loan. Some loans are "assumable", but you will still need a deed and paperwork and not every loan is like that. If you do buy the land/house, then you can rent it back to them. I would make sure a lawyer or a title company is involved in the sale, the deed and the mortgage. Don't be rushed into anything. They are hoping you will make a mistake in your rush. Quote Link to comment Share on other sites More sharing options...
Catwoman Posted May 9, 2013 Share Posted May 9, 2013 Sounds shifty. I would insist on a "normal" straight real estate transaction, or I would walk away. Quote Link to comment Share on other sites More sharing options...
Hen Posted May 9, 2013 Share Posted May 9, 2013 I agree with others who are saying to walk away. If you are doing this, hoping that being nice and saving them will earn their love and gratitude, I think you are mistaken and will hurt your own family trying this. I understand wanting the land to stay in the family, but it sounds like you are walking into a big mess and are about to be taken advantage of, too boot. if you do decide to go forward, get your own mortgage, your own financing and hire a lawyer to do a title search first to find any liens on the property. Do not joint own it with them, but draw up a separate agreement for a lifetime occupancy for them. Quote Link to comment Share on other sites More sharing options...
Um_2_4 Posted May 10, 2013 Share Posted May 10, 2013 What Hen said.. I understand wanting the land.... But having been in the position of being scammed and I went through court to get my $$$ back, I was about to put liens until they decided to pay up. so there could be liens on it already (even if there is a mortgage on it) or people getting ready to put liens on it, so do everything in your name... He may be upset because he wants the $$$ himself and knows if he sells it, he won't see a dime, even if you let them live rent free. Quote Link to comment Share on other sites More sharing options...
StephanieZ Posted May 10, 2013 Share Posted May 10, 2013 No way, no how! This is one big fat scam! Absolutely do NOT send them money and expect them to pay the mortgage. If you buy the house from them, then they won't own the house, and so the mortgage must be paid off upon sale. I've had plenty of commercial mortgages with prepayment penalties and balloons, but they ALL didn't apply the prepayment penalties if you sold -- only if you refinanced yourself. The balloon, like the rest of the mortgage is due 100% upon sale. So, when you buy it, that mortgage is due. That's where your $$ will go! A life estate for the home is worth a LOT. Typically at least 50% of purchase price, I'd imagine, depending on their ages (more if they are young) and number of people (more since there are two). Remember, you'l have to upkeep this home while they are living rent free! If you want the land, see if you can buy just the land, leaving them a half acre with the house on it. Then have a clause of "right of first refusal" on buying the house and remaining land when they want out. Get your lawyer on this ASAP. Also, get a very thorough title search ASAP. Be sure to buy "Owners Title Insurance" along with the standard "Lenders Title Insurance" if you do go ahead with the sale. That will make it so you have insurance against any losses due to claims against the land that the title search company doesn't find. (I.e., you buy it, and ten years later, a contractor's lien or third mortgage, etc, comes up and they take it from you!! Standard title insurance will only protect the lender!) I'd be very, very wary. Let your lawyer handle everything. Quote Link to comment Share on other sites More sharing options...
Joanne Posted May 10, 2013 Share Posted May 10, 2013 Please don't let your love for this land eclipse the need to make this as professional as possible, if you do it at all. The history of "family deals" does not reassure me; it makes me more concerned. Quote Link to comment Share on other sites More sharing options...
msjones Posted May 10, 2013 Share Posted May 10, 2013 I'd do the deal only and entirely through a lawyer, and experienced real estate agent, with a regular bank mortgage. Nothing shady or iffy or in-the-family with these folks. Quote Link to comment Share on other sites More sharing options...
Mergath Posted May 10, 2013 Share Posted May 10, 2013 I don't know much about real estate, but it sounds like a terrible deal for you. You pay for the property, pay for the upkeep, but don't have access to the land, and they get to live there rent/maintenance-free forever? And they might be trying to screw you on top of all that?? Walk away. Quote Link to comment Share on other sites More sharing options...
bettyandbob Posted May 10, 2013 Share Posted May 10, 2013 Given the details you've said, my gut says : RUN AWAY NOW. You've presented nothing that suggests you will actually acquired this land. You minimize damage to your relationship to mother, by refusing to do a deal now (early in the process) rather than getting financially wrapped up in her messed with her untrustworthy spouse. Wait for the land to become available in the competitive market. You may not get the land. But you will not go through the mess your mother's husband is pressuring you towards. Quote Link to comment Share on other sites More sharing options...
Catwoman Posted May 10, 2013 Share Posted May 10, 2013 The more I think about this, the more I keep wondering why you are even slightly considering doing this. Seriously, walk away. If they need money, they can sell you the land outright in a traditional real estate transaction and go live in a nice little apartment somewhere. Please don't fall for this scam. Quote Link to comment Share on other sites More sharing options...
QueenCat Posted May 10, 2013 Share Posted May 10, 2013 The only way I'd buy this property is buy directly buying it.... as in, lawyer, title search, appraisal, new mortgage with MY name on it. If they want to continue to live there, rent can be based on mortgage payment and maintenance. Quote Link to comment Share on other sites More sharing options...
Slipper Posted May 10, 2013 Author Share Posted May 10, 2013 Sorry, helping my youngest prepare for her dance recital, so I haven't been able to reply. I understand everyone's concern. I'm continuing to look at it, because I do really want the property, but I'm not going to make foolish decisions (understandably, the life estate does look foolish, but I mean the rest of it) that will compromise my family. You all are giving me some wonderful thoughts and suggestions and I appreciate it. All of our property buying experience has been with family members so I'm jaded enough to know to be wary. On the flip side, I've never had a 'normal' or 'typical' home-buying, land-buying experience so I don't have a lot of practical knowledge which is why I posted. I'm grateful for the replies. At this point, if it has pre-payment penalties, a balloon mortgage or can't be purchased in a typical normal way AND it must be financially a good investment (meaning that it is way underpriced), then I'm not buying it. It's been on my mind a lot and I can't shake the feeling that something is 'off'. I do plan on using my own attorney and having title searches and my own appraisal done. I won't be rushed into it. I don't trust my step-father, but at the same time I'm trying to look after my mother. That's a limited relationship, I won't look after her needs at the expense of my kids, but I'm still looking into it. If I find out what the 'trick' is with all of this, I'll let you know. I agree, something's off. Quote Link to comment Share on other sites More sharing options...
LifeLovePassion Posted May 10, 2013 Share Posted May 10, 2013 Please ask more questions as you get specifics from them. The balloon mortgage and prepayment penalties wouldn't affect you purchasing the land if you took out a mortgage in your name. A balloon means they have a limited amount of time to refinance or sell before the balloon date. If their credit has tanked they may not qualify for another mortgage. A prepayment penalty is typically only for the first 3 years of a mortgage (and often on higher risk transactions from my experience). It would only effect how much they would owe the lender to pay off the loan. And I second the Owners Title Insurance. It will protect you from something the title search may have missed. Quote Link to comment Share on other sites More sharing options...
justasque Posted May 10, 2013 Share Posted May 10, 2013 If you buy the property for $75K (or whatever they owe), that money will go directly to pay off their mortgage. (Your mortgage company will pay off their mortgage, leaving you to pay off your new mortgage.) That is pretty routine. Pre-payment penalties are more for the original mortgagee paying extra as they go, not for paying off the loan when the property is sold. Once you have a closing date, the bank will let you know exactly how much is needed at closing to pay it off. (The specific amount will be slightly different depending on the date you pay it off, and there are likely to be a few minor fees.) At that point, your mom and her dh will have no mortgage payment. They also won't have any extra to pay off any other bills. However, assuming you set up a trust or rental agreement, they will have a place to live rent-free, and they will not be responsible for taxes, so that should help their cash flow. If you decide to do this, you will have to have a long, honest conversation about who is responsible for maintenance (parts and labor), how you will decide what maintenance is needed, what will happen if you have to sell the property, and so on. Since it's your mother, and not her husband, who you want to protect, you may wish to put the trust or rental agreement in her name only. Think through how it would play out if they were to divorce, or if she was to die before (maybe long before) he does. Think also about how much access or use you will have of the property while they are living there. Do you want to rent them the whole 20 acres, or just the house? What about the outbuildings? Under the circumstances, I think I'd be inclined to do it, so that my mother would have a place to live regardless of her husband's iffy finances. And it will be convenient to have your mother nearby-but-separate as she ages. But I would make absolutely sure that the whole deal was on the up-and-up, get a new mortgage in your name, set up the trust in your mother's name, use a lawyer, check for liens, etc., etc. etc. Quote Link to comment Share on other sites More sharing options...
zoobie Posted May 10, 2013 Share Posted May 10, 2013 Nope. You should only buy the property in a straight, legal transaction. You don't need a realtor, so you'd save on that, but you do need an attorney to draw up the contract and do a title search. Giving him the money? Risky. He could spend it anywhere. Even if you paid that mortgage directly, he could take out additional mortgages, incur debt resulting in liens, lease the property, etc. Prepayment penalties on mortgages aren't the norm, and most of them exclude paying the mortgage off due to a property sale. Quote Link to comment Share on other sites More sharing options...
Happy Posted May 11, 2013 Share Posted May 11, 2013 You've gotten great advice. Please think things through very carefully. I also want to add weight to considering what happens when or if your mom passes before him. How comfortable would you feel dealing with him living in that property for several years? What if he were to marry again? Get the advice of a good real estate attorney, then go get a second opinion. Quote Link to comment Share on other sites More sharing options...
Soror Posted May 12, 2013 Share Posted May 12, 2013 Sorry, helping my youngest prepare for her dance recital, so I haven't been able to reply. I understand everyone's concern. I'm continuing to look at it, because I do really want the property, but I'm not going to make foolish decisions (understandably, the life estate does look foolish, but I mean the rest of it) that will compromise my family. You all are giving me some wonderful thoughts and suggestions and I appreciate it. All of our property buying experience has been with family members so I'm jaded enough to know to be wary. On the flip side, I've never had a 'normal' or 'typical' home-buying, land-buying experience so I don't have a lot of practical knowledge which is why I posted. I'm grateful for the replies. At this point, if it has pre-payment penalties, a balloon mortgage or can't be purchased in a typical normal way AND it must be financially a good investment (meaning that it is way underpriced), then I'm not buying it. It's been on my mind a lot and I can't shake the feeling that something is 'off'. I do plan on using my own attorney and having title searches and my own appraisal done. I won't be rushed into it. I don't trust my step-father, but at the same time I'm trying to look after my mother. That's a limited relationship, I won't look after her needs at the expense of my kids, but I'm still looking into it. If I find out what the 'trick' is with all of this, I'll let you know. I agree, something's off. Our house and land was bought through dh's father. However, it was done through a lawyer just as a regular deal would be. We paid interest to him, just as we would a bank and the title was officially transferred when it was done. On my parents side though there have been a lot of deals through the year and a lot of verbal agreements and in the end a lot of hurt feelings due to the lack of clear expectations and such. I wouldn't do a deal with a friend or family member unless it was done according to what is fair for both and generally considered good business practices. Quote Link to comment Share on other sites More sharing options...
flyingiguana Posted May 12, 2013 Share Posted May 12, 2013 If you get your own loan for 75,000, the mortgage payments alone shouldn't be over 400 dollars. So I don't think it's true that their mortgage payment of 400 a month is incredibly low. (Although the property taxes and insurance, if in escrow, will make that higher. But who should be paying taxes and insurance while your mom and step dad are still living there?) The whole thing sounds shady, and my guess is that when you start to do it right, the deal will suddenly fall apart. However, IF they are acting in good faith, and IF you can do this legally, I wouldn't shy away from doing the mortgage on your own house to buy the place. You can often get a much better interest rate if you mortgage the house you're living in rather than putting the mortgage on the property that you won't be living in. Quote Link to comment Share on other sites More sharing options...
Tap Posted May 12, 2013 Share Posted May 12, 2013 Our house and land was bought through dh's father. However, it was done through a lawyer just as a regular deal would be. We paid interest to him, just as we would a bank and the title was officially transferred when it was done. On my parents side though there have been a lot of deals through the year and a lot of verbal agreements and in the end a lot of hurt feelings due to the lack of clear expectations and such. I wouldn't do a deal with a friend or family member unless it was done according to what is fair for both and generally considered good business practices. I would be cautious about the life estate also. If your mom passes before he does, you could end up caring for him for 10,15, 20 years on the land, without your mother to buffer between you. It can also get awkward if you are forced into a caretaker position with him because he is on the land, you are the person nearby and he refusing to go into a home or other care facility. My mom ended up in an awkward situation with her own mother with a life estate. Quote Link to comment Share on other sites More sharing options...
AK_Mom4 Posted May 12, 2013 Share Posted May 12, 2013 A safer arrangement than the life estate would be to set up a standard rental agreement. Your mother and stepfather would have protections under state laws as tenants and you would have protections as landlords. This type of arrangement makes it easier to get insurance and also lays out exactly who is responsible for repairs and such on the property. I think a real estate lawyer will be able to help protect you from some of the worries you have about shady dealings, but you are right to trust your feelings on this one and be concerned. Protect your own interests and handle this as a standard business transaction. Quote Link to comment Share on other sites More sharing options...
TranquilMind Posted May 12, 2013 Share Posted May 12, 2013 My mother and step-father want us to purchase their home (they have financial problems). They own a large 1-bedroom home with some out-buildings for storage a small guest house and around 20 acres. They've offered to sell it to us for $75,000 (the amount of the mortgage they owe on it). I'm not sure what the appraisal is for, but I feel certain it's over $100,000. Financially it's a good deal. Additionally it adjoins our property which would allow us to have one large plot of land. (The downside is that they would retain life estate - they are both retired - until they die so we couldn't use the main house until then). My step-father is sneaky (and just a bit shady and a chronic liar). I really want the land (it's been in our family for quite a while) but I have to triple check everything he says. The mortgage payments are unusually low, less than $400 a month. Yesterday, the subject came up and he said that he wanted us to make a commitment in the next 60 days and go ahead and sign. They stated that the reason for the urgency is that they want to be able to commit to traveling and other fun things but can't until this is decided. I know I need to see an attorney, but I'm trying to figure out what sneaky thing is heading my way before I see an attorney. (And I'm definitely using my own attorney, not a 'together' one for this). In our discussion, he suggested that we send the payments to them and they would continue to pay since nobody can assume the mortgage due to the contract. He also mentioned briefly that in a few years we would need to make a larger payment for a balloon payment or we would lose everything. My thoughts were to take out a loan on our existing property and pay off their mortgage since I'm not comfortable sending them the money to pay for the mortgage. He said that wouldn't work but didn't say why. Is there a pre-payment penalty on balloon mortgages? (And again, I'm definitely having an appraisal and my own attorney. This is family property. If it can work out, I really want it. If it doesn't work out, I'm okay with walking away.) I feel like there's more going on behind the scenes (and this was a mortgage taken out just a couple of years ago, which also didn't make sense). The reason for needing the $75,000 mortgage was so people couldn't sue them and take their house. My step-father said that if someone knows a mortgage is on the house, they won't try to take it. That just seemed like a lot of money and I advised my mother against it, but she followed my step-dad's advice. I know little about balloon mortgages. What can anyone tell me about them and what I'm wandering into with this situation? I'm not understanding why they would not want you to pay off the mortgage, giving them a lump sum, while retaining their life estate. Sounds perfect. And if you are the owner of record, they can't be sued anyway...so that is confusing. Did an event happen involving them or the property that makes them fear legal action? I do not believe there is a prepayment penalty on many mortgages these days, but you will need to check. Yes, you need an experienced REAL ESTATE attorney to protect your interests, not just any attorney. Quote Link to comment Share on other sites More sharing options...
laf919 Posted May 12, 2013 Share Posted May 12, 2013 For what it's worth, my grandfather re-married twice after turning 60 (the second wife died before him and he remarried again). When he married the 2nd time, he moved into his wife's condo. The condo remained in her name, she paid the mortgage and they worked out between them the other expenses. When she died, he had the right to stay there rent free as long as he did not remarry - but he had to pay the homeowner's association fees and maintenance. When he met his third wife, but before they married, he bought another condo and did the same with her - although this time he owned the property and when he died, she lived there for a few years before moving into assisted living. Again, she was responsible for the homeowner's association fees and assessments and maintenance, utilities, etc. My mom and her siblings did do some touch-ups before selling the unit after she moved out, but it was typical, minor stuff (wash windows, repaint, etc.) So - I don't know the details of how you spell this out in legal documents, but I know it can be done. My grandfather had a clause in his will for his wife to continue to live there - but I am betting there was some other document as well. (he didn't seem to leave things to chance) Of course, we all dearly love my grandfather's widow and she is one of the sweetest, nicest people I have ever met - so there were no qualms about her staying on. We'd gladly still have her there 9 years later if she had wanted to stay that long - so, you may want to handle things quite differently if your step-father is not someone you'd want hanging around. Quote Link to comment Share on other sites More sharing options...
bettyandbob Posted May 13, 2013 Share Posted May 13, 2013 I would be cautious about the life estate also. If your mom passes before he does, you could end up caring for him for 10,15, 20 years on the land, without your mother to buffer between you. It can also get awkward if you are forced into a caretaker position with him because he is on the land, you are the person nearby and he refusing to go into a home or other care facility. My mom ended up in an awkward situation with her own mother with a life estate. This is important. I would insist on the life estate being based solely on my own mother's life, In the event of her death, the step father needs to find another home. You should be in a position to be his care giver. I am sure there are ways to prepare a life estate to do this. Quote Link to comment Share on other sites More sharing options...
AimeeM Posted May 13, 2013 Share Posted May 13, 2013 (Husband of AimeeM!) The only way I would agree to do this is if the following criteria were met: A ) I agree with a PP who suggested the life estate be based solely on the life of the OP's mother. Great compromise. B ) You can acquire a traditional mortgage and pay off the balloon mortgage immediately, with OR without penalty C ) You can absolutely validate that there are no leans or claims on the property contingent on mortgage/buy out times/limits, etc. - Tony Quote Link to comment Share on other sites More sharing options...
justasque Posted May 13, 2013 Share Posted May 13, 2013 Curious, I perused the Wiki article on Life Estates, and was interested to glean that someone with a life estate can sublet the property to someone else. In your case, as you described the situation, I don't think you'd want your mom to have that right. If she isn't using the home for whatever reason (say, for example, she needs to move to a nursing home), then you as the property owner may want to be able to rent it to someone else. In this scenario, a rental agreement (of the $1 a year variety), may be a better choice. Part of the thinking should be to consider the difference between the price you will pay for the property vs. the market value. The difference between these numbers is essentially the price your mom is paying you for the right to live on the property for her lifetime. You might want to look at this number, make sure you both understand what the number is, and somehow factor it into your agreement, so that both parties are getting a fair deal. For example, you, as landlord, could decide to pay some or all of the utilities on the rental property for a certain period of time or until a certain ceiling amount is hit, which again would give you the ability to ensure your mom has decent living conditions despite her husband's poor financial skills. Or perhaps you could put that money towards the taxes and insurance that they would otherwise would have had to pay if they had not sold the property to you - this.would make a certain amount of sense as you are taking over not just their mortgage, but these other costs as well, while they still get to live in the house essentially as if they owned it. You would be paying these costs anyway of course, but by doing the math and making the numbers clear to both parties, you can keep things on the up and up and make sure both parties are getting a fair deal. You don't want to be accused of swindling them out of the property at a reduced rate - putting all this into your agreement will make the reasoning behind the lower price clear. Quote Link to comment Share on other sites More sharing options...
Joanne Posted May 13, 2013 Share Posted May 13, 2013 You seem fairly convinced and "decided" already. I'm not sure that any words of advice or discouragement on our end are going to sway you. I do see that you are trying to minimize your risks, but I worry that you are looking for a way to make the deal work instead of looking at it from an objective, non personal standpoint. No sane, thinking, person would consider this deal from a non relative or with land they didn't have an emotional ownership in. This situation, regardless of structure, seems risky and not worth the hassle that will emerge. I'd be finding a way to NOT do it, given the entire context. Quote Link to comment Share on other sites More sharing options...
justasque Posted May 13, 2013 Share Posted May 13, 2013 No sane, thinking, person would consider this deal from a non relative or with land they didn't have an emotional ownership in. I think the advantage of having a beloved elder nearby can make caring for them as they age much, much easier on the OP. This goes double if the elder's finances are somewhat under the control of someone else who has not proved trustworthy. This deal gives the OP power over her mother's home, so that the step dad cannot lose it or endanger it financially. And it does so, if structured right, in a deal that is fair to both buyer and seller. If the OP's mom becomes impoverished, without this deal the OP might end up having to take in both her mom and her stepdad. Planning ahead in this way may help prevent that, or at least delay it. The OP is buying land adjacent to her property. The OP's mom can stay in her home despite not being able to afford the mortgage. The deal as proposed by the stepfather is obviously unacceptable and possibly shady. But there's no reason a similar deal can't be structured to be on the up-and-up. Several folks in my family have done real estate deals of various kinds, and it's always gone smoothly and been a win-win. But the key is to do it all very carefully, with a lot of thought put into possible future scenarios, and care taken to be sure that both parties are getting a fair deal. All this assumes the OP can afford to buy the property, of course. Quote Link to comment Share on other sites More sharing options...
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