Need some advice

**toliejen** · 10-23-2008, 07:51 PM

My house has been on the market for a few months with no bites. We are not desperate to sell, but would like to relocate as soon as possible.
The real estate agent we are working with is a close, trusted friend. He has a family co-op (of sorts). His father is a home builder, his brother is a contractor and he sells the houses.
He also works with investors. He brought an investor to see our house and today approached us with the deal. Because of new laws (?), investors can not hold more than 3 loans in their names, making it difficult for them to buy up more properties. So here is the deal. It is described as a win-win for all of us.

The investor buys our house from us, but it the title remains in our name. The investor is under contract to make the full payments of our mortgage and will buy us out in 3-5 years (in the mean time, leases our house out). This gets us a buyer, we get to move, our agent gets to sell us a "trade-up" home and the investor gets another property, thus the win-win.

The obvious risks in this are if the investor defaults, we foreclose and evict. But we are left with 2 mortgages. If that were to happen, we could sell the house for what we need to get out of it, but we would still be responsible for 2 mortgage payments until that happened.

We want to make an extremely informed decision. Any advice would be appreciated. Let me know what questions I need to ask, what information I need to get about the investor.

What are the legal ramifications of a deal like this?
How do the taxes work when filing and you have two mortgage responsibilities, but are only paying for one?

Please, please, tell me what you know that will help me make an informed decision, one way or the other.

**Mario J.** · 10-24-2008, 12:26 PM

Why would you want to do a transaction like this with so many variables? If you are interested in pursuing this, then I highly recommend you hire a Lawyer well versed in real estate law to advise you.

Mario J.

**toliejen** · 10-24-2008, 01:09 PM

Thanks for the advice. Thinking about it, even just overnight, we have pretty much decided it is more risk than we want. Because we aren't desperate (yet) to move, we are just going to wait it out and hope for a more conventional buyer.

**Jared** · 10-26-2008, 03:57 PM

What the investor is doing is taking your house "subject to" the existing financing. The mortgage stays in your name (which you hide from your mortgage company RED FLAG #1), the investor is responsible for payments (not his house, he doesn't have anything at risk RED FLAG #2), and like you said, they put somebody in there on a lease with an option to buy within 3-5 years (people with less than desirable credit right now RED FLAG #3). If the mortage company did find out about this, they could exercise their due on sale clause, making the amount of the mortgage due.

Sounds like you are making the right decision in my opinion. If you found a house that you really wanted to buy then you could sell your house rent to own and control everything yourself. My two cents... keep the change!

**toliejen** · 10-26-2008, 04:42 PM

Thanks Jared!

You confirmed all my "Red Flag" fears. You being an investor and a soon-to-be agent, I feel confident taking your word for it. I am a person that believes strongly in gut feelings. This just didn't feel right from the start. That is great if it works for some people (our agent said they had done 5 of these deals already this year), but it never felt quite on the up and up to me.

Thanks for taking the time to share your wisdom on the issue.