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Buying a relative's house

I know someone who has sold multiple houses with seller financing, ie giving the buyer a mortgage. This person gets calls constantly from people who offer to buy the mortgages. Mortgages are public records. I have also seen classified ads seeking to buy mortgages. It is not a problem. But, to get FMV someone will have do some research on the lady's behalf, to find out what FMV is at that time and also find a buyer willing to pay FMV. This can get complicated. Say the mortage interest rate is 6%; how desirable is it, if the current rate is 3%? Or if the current rate is 12%?

Also, selling the note usually has no effect on the buyers of the house, other than the address to which the checks are sent, *provided* the terms are standard. Don't get a standard contract and then strike out all the clauses you think won't apply or you don't understand.

Several loans I have obtained over the years have been sold to others, no big deal.

Anyway, the value of money is an important factor. I too would rather get full value for the house at the time of sale and invest the money. Given that there is a plan for what happens after the assets run out, it seems reasonable that the lady may be able to tolerate a higher risk investment than a CD, so may be able to earn higher interest than a CD. I probably would put it in a mutual fund of stocks or mixed stocks and bonds. Mutual funds provide a lot of flexibility: you can take out exactly what you need, when you need it.

Una

Reply to
Una
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Thanks Joe and Una for the mortgage resale primer. You learn somethin' new every day!

Reply to
kastnna

Non-expert opinion: Yes. Discounting to an arms-length buyer who will pay cash is normal. So discounting to you would seem proper too. In addition, a buyer who will accept a property without the property being emptied and broom clean would seek and reasonably get a discount too.

Yes, if she is there for medical care as it usually is with Alzheimer's. It is not just for her convenience as a place to live. See

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page 12. Medicaldeduction is subject to the 7.5% threshold.

Reply to
DF2

Actually I am not sure the family mortgage would be the first mortgage; they are talking about paying 50% at the time of sale. That could be financed via a first mortgage from a lender (bank); the lender usually will require that its mortgage be the first. Designation of first and second is achieved by the order in which the two mortgages are recorded at the county records office; the documents make no reference to their relative standing.

Anyway, re the scenario in which the lady gives the buying relations a mortgage, this could work out well in the event of higher-than-expected medical care expenses *if* the buyers are able to pay extra each month. In effect cash-flow to the lady would increase as needed to cover her bills, the duration of the mortgage would shorten, the lady would get less total interest income, and her relations would pay less interest income.

If the buyers have high equity in the house, probably they could get a home equity line of credit to provide higher cash-flow to this lady as needed and without causing themselves cash-flow problems.

Una

Reply to
Una

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