“Stepson” and his girlfriend bought a fixer-upper house with the intention of (probably) flipping it. They borrowed a substantial amount of money from his father and mother (my girlfriend) for repairs without any formal paperwork. They also borrowed from a couple of lawyers for the “mortgage” at an exorbitant rate. 18%, I think. You probably already know where this is going. After doing a substantial amount of work on the house, they had a falling out and she is now living in another state. The stepson can’t make the payments and the house now needs to be sold. The gf says she wants half of any profit. Mom and dad say “Whoa, there. Maybe after we get our loan money back.” It is not likely that there will be any profit. They probably won’t be able to sell for what they have into the whole project. The gf has acknowledged that she owes the parents by way of texting but there is reason to believe that she has a drug problem and she isn’t the most stable person. So, what options do the parents have? They have accepted they will be taking a loss but want to minimize the pain. My gf has said something about having the kids’ name removed from the deed and having hers’ and her ex’s added. Can you even do that, assuming of the kids consent? The whole idea was a bad one from the start but its too late to change things
RE paperwork is among the hardest to change other than through the most formal processes, so if her name is on it… she’s in control and party to all actions until she signs off.
With no paperwork on the parental loans and lawyer/loan sharks involved, trying to do interim changes like removing her from the deed (even with her cooperation) could be blocked until all the jots and tittles are taken care of to all parties’ satisfaction.
…take off and nuke it from orbit, etc.
Could they file a lien against the property? The answer to that would probably vary by jurisdiction, but it’s worth looking into, especially if stepson is willing to sign some paperwork for the loan.
The ownership - the names on the deed - can only be “changed” with full cooperation by the current owners. I really see no reason the girlfriend would do this, and I’m not sure it would be in the parents and step-parents favor to do it, anyway. By owning the property, you would take on all liabilities and debts.
You can bet that the lawyers who loaned money have signed loan documents, meaning they will be first in line to be paid off. If there is any money left over after that, then without a formal loan document, it would be up to the owners to decide if mummy and daddy get paid back. Even with family members, you should always have written loan documentation, and it is even better to record it at the courthouse.
Actually, no.
Depending on whether the lien is attached to the individual or the property, they could easily transfer title (assuming the have the consent of the current owners), but if the lien is attached to the property, then the father and mother are now held liable for the debt.
If the verbiage of the loan has it attached to the original purchasers, then (assuming the house was free-and-clear of all defects) they could own the house without owing any other obligation to the lawyer / loan sharks.
ETA: This is, of course, assuming that there was no bank financing or any sort of other person who has interest or priority on the property. Also, without knowing more about the situation, potential encumbrances on the property, etc., title insurance might be difficult to obtain.
I sell commercial real estate and I don’t pretend to be a lawyer, but I’m not seeing how the mom and dad non-documented money lenders have any exercisable legal interest in the house whatsoever. They are SOL. Assuming the 18% lenders were not insane I’m pretty sure their loan does not allow assignment of the real estate to another private party while their loan is active.
If the son is under water and the house is unfinished he and ex GF have to satisfy the attorney’s 18% mortgage note or they will foreclose and own the house. The house needs to be accurately appraised ASAP then the pieces will fall into place as to what the options are. I would also suggest reading the 18% attorney mortgage carefully for any additional hidden gotchas.
From the 18% mortgage to the undocumented parent loans to the boyfriend and girlfriend taking on a fixer upper house mortgage this sounds like one of the biggest real estate cluster fucks I’ve ever heard of. Other than the attorneys everyone involved in this mess sounds like they have brains the size of baseballs.
Aside from it being rented to paying tenants, no one’s going to get any money w/o this house being sold probably, including the GF. Depending on the state, a quitclaim deed signed by her can remove her name from the documents for the mortgage and their lack of marriage should make that somewhat easier. At the same time, it may be up to the lenders to accept that quitclaim deed; if it doesn’t further their aims I’d lay odds they would choose not to unless forced by a court order.
As for the people who loaned money w/o paperwork in place, they are SOL unless they choose to sue which you know they won’t do.
The quickest way out of this cluster is for the ‘stepson’ to file bankruptcy. It will stop adversely affecting his credit (if you’re in the US) in about 4 years and it’s a better choice than struggling to make the house payment for another year or so, dragging down all the other bills that will also adversely affect their credit and over a longer period of time. Let the lenders have the house and take the loss now before it balloons more.
Caveat - wherever the ‘stepson’ lives, unless he rents an apartment or the like, will fall under bankruptcy protection as his residence cannot be subject to foreclosure action unless there has been a motion granted for such action specifically. If he lives w/ his mom in her house that house will appear to be in bankruptcy protection.
He needs to sit down w/ whomever they borrowed the 18% note from and explain what’s going on, see what they want to do. I expect it won’t make things better (financially) for the ‘stepson’ but better to know now than wonder and worry.