Hey all. I have a couple of real estate questions. I have a somewhat (I think) non-standard situation and could use a little help. Thanks in advance.
Backstory - In 2003 my wife and I bought my parent’s house…sort of. We actually bought 50% of the property in exchange for taking over the remainder of the existing mortgage. At the time, the principal on the mortgage was less than 50% of the assumed value of the house. We filed a “Grant Deed” and a sales contract with the county. The sales contract is “equivalent of the Seller carrying the balance under a Note and Deed of Trust.” Since then, my wife and I pay the insurance and 1/2 the property taxes while my parent’s still pay the other half of the taxes.
So… now we are looking to buy the other half of the property. For various reasons, I would like to simply buy out my parents so that we are no longer doing business together. My questions are, basically, how do I go about doing this? In 2003 we didn’t do anything except go down to the lawyer’s office and sign the contract. I’m trying to find a way to work through this that is fair to everyone but my lack of knowledge about the nuts and bolts of the process is hampering my progress. Again, thank in advance for any help/advice/suggestions.
Per your note if "The sales contract is “equivalent of the Seller carrying the balance under a Note and Deed of Trust.” your parents (it appears) are simply holding the financing via a personal note for the balance owed. In other word they are acting as the bank in this case.
The contract should spell out the conditions of the sale and your options to complete the purchase. I’d contact the original atty and ask what the procedure would be to settle on the remaining balance.
The quoted part in the OP is what the contract says - i.e. my folks are acting as the bank. The contract does cover concluding the sale of that half of the property (basically we just have to pay off the balance of the loan). However, the contract doesn’t cover the other half of the property - the half we would now like to buy. So what I’m wondering is, what are the steps that we need to take to own everything outright.
What was the understanding when you entered into this? Just hanging out with a half interest in a property without a defined optiion to purchase plan sounds very odd. All this should have been discussed when the scenario was originated.
The understanding was (and is) that we would buy the place outright when we were able to.
I have a less than rudimentary understanding of the general process, i.e. find a house, make an offer, move in. But am wondering how that process then fits with my specific situation.
I may have answered too quickly. If (upon re-reading your OP) the bank mortgage is still outstanding then they are still the primary borrowers, and the payoff options to sell the house to another party will be defined by their loan contract with the bank, which should not (normally) restrict their ability to payoff the remaining principal and transfer ownership.
It’s still not clear what the terms of your contract with them are. Does it define a sales price? If it does and that price is OK with you, notify them of your intention ot obtain a loan and close on the property.
Correct. The bank mortgage is still outstanding and they are still the primary borrowers. I am assuming that their agreement does not restrict their ability to payoff or transfer title considering we had a lawyer draw up the Grand Deed and Sales Contract based on the existing mortgage situation.
Yes, the sales contract defined a price - it was (is) the amount remaining on the mortgage in exchange for half of the property.
Then tell them you’re going after a loan and will close on the property. You will pay them and those funds will pay off the remainder of the existing mortgage.
You should see a bank or mortgage broker before announcing any of this to make you you are pre-qualified to get the amount necessary to close on the property.
There is no set price to acquire the entire property. Problematic in that, I assume, we should get an independent appraisal but beneficial, I suppose, in that it’s worth a lot less now than it was in 2003.
Then it sounds like all you really have is a subordinate (to the primary loan) partial interest in the property and the right to occupy the property.
To buy it you need to mutually agree on a price by either appraisal, the average of two appraisals or (possibly) getting a mutually trusted experienced Realtor to do a thorough market analysis (often more accurate than an appraisal). Common, uncomplicated residential appraisals generally cost $400 - $500 a pop and the bank will also want one (which you will also pay for) for the loan.
Now… you when you close I’m honestly not quite sure how your subordinate partial interest in the property will be handled as it’s not quite the same as an arm’s length second mortgage. It really depends on how the contract is written. Is the portion of the mortgage you are paying accumulating equity as you pay the principal down or is your occupancy of the real estate considered to be the sole benefit?
You really just need to get a good real estate attorney to hash this out. This will be bread and butter for them.
All I can say, too, is get your real estate lawyer on this. My guess it will be the best couple of hundred bucks you’ll ever spend. Doing a real estate deal with your parents is probably low-risk, but I’ve watched enough Judge Judy to know that even when dealing with family, get it all in writing, and get it all done properly legally. There could be things both parties are missing that could bite you in the butt later; it’s your lawyer’s job to find those things out, and his professional ass on the line if he screws up, not yours.
But am wondering how that process then fits with my specific situation.