There is a really nice house for sale across the street that I want, but I really don’t want to go throgh the hassle of “buying” and “purchasing” and “brokers” and “taxes” and all of that, and I wouldn’t imagine that the seller does either. Would the seller be able to refinance the house and put me on the mortgage along with himself and then refinance it again and take himself off of the mortgage and save me a couple of thousands of dollars in taxes in the process?
What you are asking should ring alarm bells with any reasonable person. If you were selling a house, would you take such a risk if it was offered to you?
That might be considered tax fraud. If you want this house, you have two options:
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Call up the agent and make an offer. You don’t have to have an agent of your own, but if you’re not well-informed about the process, you should probably get one.
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Wait for the house to go off the market. Most listings are for a certain period of time. If the house doesn’t sell, the owners have to re-list it. Once that time period is up, you could make a for-sale-by-owner arrangement.
There are really 2 issues here:
- Transfer of ownership - I am not a real estate professional so take this with that in mind. Assuming there are not real estate agents involved, you can handle the whole thing with a real estate attorney. They don’t charge the commissions that real estate agents do. Or, if you and the seller can work out the paperwork within the legal requirements, then go for it. BUT, you still have to satisfy the governing bodies. So, taxes might be required.
- Paying for the purchase - This is where you can pretty much do whatever you can agree to with the seller. If the seller accepts a bag of M&M’s… Savings can occur when in a “for sale by owner” arrangement. This is sometimes done when the seller doesn’t want to part with 6% of the sale price to a real estate agent. If the seller is interested, they can hold the loan rather than a bank, etc. Good luck!
I think you are making this more complicated than it needs to be.
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The owner can just sell his house to you without a realtor. People do it all the time and there are websites that are devoted to it. You will have to pay closing costs on the mortgage no matter what but that is only 2 or 3 thousand dollars. You might need an attorney to help draw up the documents but that should be a lot cheaper than him paying a 5% commission.
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I don’t see where taxes come into this at all. If it is currently the owner’s primary residence, the capital gains exemptions for homes would almost certainly mean that he would owe no taxes on the sale. You wouldn’t either. Your first tax would be the property tax bill.
In short, just get him to sell it to your without a realtor. That isn’t so exotic.
Different locations have different rules concerning home purchases.
Some states require the use of an lawyer. Other locations do not. Real Estate agents are not required, but may be an excellent idea.
IMHO your idea as presented in the OP is a very bad idea.
You have no protection against fraud, or a bad tittle. There is a valid reason that Escrow services and tittle insurance exist.
In many states/counties/cities, the gummint gets a 1% or so transfer tax. In many areas, title insurance is required, necessitating a title search. It’s a tad more involved than selling your '97 Buick to the kid down the street. 
The seller would have to check the contract he signed with the realtor. I assume he has one, since it is for sale already.
The thing that rings alarm bells for me is your suggestion he refinance along with you. How is this going to save either of you anything over you getting your own mortgage? If I were a mortgage broker, I’d red flag what you suggested. You would both have to get credit checks, and he would need assurances that you really would let him take his name off. If I were the seller, I wouldn’t even want to talk to you after such a suggestion.
What taxes do you think you’re going to avoid using this arrangement? The owner of the house (whether it’s the current owner alone, you alone or both of you together) will still be responsible for property taxes.
At some point in this arrangement, the title of the house will need to be transfered from the current owner to you, and there’s no way to get around any taxes that might be involved there.
The mortgage and the title are two separate things. If you did it exactly the way you describe it, the owner could wind up with ownership of the house and you’d wind up with the mortgage payments.
Yeah, um, have you ever actually gotten a mortgage or bought a house? There is about 2 reams of paperwork that has to be filled out to transfer ownership, do title searches, etc etc, and mixed in there is sales tax in states which charge it, and lots of other things. You might avoid capital gains tax, but you will DEFINITELY be paying taxes other than property taxes.
You know what? That was incredibly rude and snarky of me. Differnt jurisdictions do have differnt rules, and the rules in your state might be differnt from mine. Sorry for jumping on you…it’s past my bedtime.
In any case, I do have a house and coincendentally I refinanced my sizable mortgage just last week. I LOVE Bank of America because the whole refinancing process was done over the phone in about 30 minutes. They took care of everything such as the appraisal, lawyers fees etc but that did cost about $3000. That should factor into the OP’s decision because it isn’t like refinancing is free. It generally costs $2000 - $4000. Although I do understand that there are sometimes property transfer taxes, that is far from universal and there are often no taxes applied to the actual sale of a home depending on the jurisdiction. The OP will have to tell us where the suppossed taxes are coming from and how much they are.
In order to own the property, you are going to have to file a deed. You should also do a title search to verify ownership and make sure there are no liens or pending legal action on the property.
Get a good real estate attorney to take care of these items, or it won’t be a legal sale.
I just checked with a local New Jersey real estate attorney and a mortgage broker. You would have to prove that you yourself owned the house in order to do the second refinance. Taking the original owner off the mortgage would make you responsible for payment, but he would still own the house, and the mortgage company wouldn’t be able to repossess if you didn’t pay. Something they would not go along with.
At some point, you would have to file for a change of deed, and the government would know about it.
So the seller’s incentive for engaging in this actually-more-complicated-than-the-regular-way deal is what?
He’s just going to walk away from the property, remain on the mortgage, and give up whatever profit he hopes to make on the deal based on a wink and a nod?
And from your perspective, you are willing to become liable on a promissory note for a property you can’t prove you have any right to occupy? Essentially, you’d be an accommodation party on the first mortgage. Accommodation parties are known in legal circles as fools with pens.
Annie-Xmas is right about the other end of it. Nobody is giving you a mortgage on a property that you don’t own. You’ll need a deed.
I’m not your lawyer; you aren’t my client; this is not legal advice. Talk to a lawyer licensed in your jurisdiction if you want legal advice about this crazy scheme.
Note: In some states, the propety taxes are included in your mortgage, and the mortgage company pays them directly to the city. It keeps the house from being sold for back taxes.
So you could end up paying the mortgage directly, the property taxes indirectly through the mortgage company, and still not own the property? WHY WOULD YOU WANT TO?