A family member of mine is getting up their in age and wants to transfer her investment property to us. She just doesn't have the will power to maintain it, deal with tenants etc.
The mortgage does have existing balance, How can we go about this to transfer by keeping the existing balance and have us as the new owners?
The home does need some TLC and and has current tenants.
What you're probably talking about is a "subject to" purchase. You're buying the house from her subject to the existing mortgage. That does have risk, specifically that the lender will call the note. Search for that term, lots of discussion about this topic.
The loan might be assumable. Get out the promissory note and read it. If that's possible, you would work with the lender to assume the note. That eliminates the due on sale risk, but does require you qualify with the lender. And there may be some fees.
In either case, you do the actual transfer with a title company.
thanks, thats exactly what I am trying to avoid. Its the fees associated with the note transfer.
I was thinking about Deed of Trust?
I think you're confusing two different things here. One is ownership of the house. The other is borrowing money. The transfer of ownership is done with a "deed". Usually a "general warranty deed". When someone borrows money and pledges a property as security for the loan, the borrower gives the lender a document that gives the lender the security interest. That document is typically a "deed of trust" or a "mortgage". Similar documents. Different states commonly use one or the other.
Some fees to transfer ownership of the house are inevitable. You can DIY it, create the paperwork yourself, and go down to the county recorder's office and record the documents yourself. That's about the cheapest you could possible do it. But you run the risk of creating title defects that have to be corrected later. I don't recommend this approach.
Further, you really do want title insurance. A title company will do a search and be sure your relative has clear title and that it transfers cleanly to you. That's typically paid for by the seller, but could be paid for by you. Its a percentage of the value of the place. Rates vary, but on the order of one percent of the value.
Second is dealing with this existing loan. First, you CANNOT transfer that note. Your relative is the borrower. The note is "owned" by the lender. The lender can transfer (sell) the note to someone else. Happens all the time, and the borrower has not control over that.
What you can do is "take over the payments" on that loan. That is, you buy the house subject to that loan. You then start making the payments. There is no transfer or any official paperwork associated with you doing this. Again, it carries the risk that the lender will find out the ownership of the property has changed and call the loan due. That is, request immediate payment of the full balance of the loan. If you don't pay it off within the required timeline, they will foreclose. There is NO WAY to eliminate this risk if you do this.
If the loan is assumable, you can work with the lender to assume the loan. Most residential loans are not assumable. But VA loans, FHA loans (this probably isn't, and they're only assumable if you move in), some old loans, and some commercial loans are. The only way to know is to read the promissory note. The promissory note is a separate document from the mortgage or deed of trust. It has all the gory details about the loan terms and will state whether or not the loan is assumable. It will also contain the "due on sale" clause, if there is one. If this is a very old loan, it's possible it doesn't have this clause. In that case, you can do the subject to purchase without the risk of the loan being called.
Way too easy. Don't overthink it.
Relative wants to "transfer" ownership. You'll need:
Get copy of promissory note
Recent mortgage statement
Authorization to release info and request to change address (to loan servicer) signed by borrower.
Have real estate attorney create a title holding trust OR use the one Ward Hanigan uses (Foreclosure Forum dot com).
Transfer title into the THT via deed and record
Keep good records. Consider using a 3rd party as trustee who is really organized, too.
Mike Morrongielo runs a good reia In SFBay area and is familiar with structuring and other resources.
Thanks John and Rick for the great advice.
Rick-This is the process I was thinking as its a family ownership transfer, I will review the promissory note and start the process from their.
There is also one tax payment left on the property where I can assume that and inform the lender that the payment will be made by myself. OR will this create too much documentation?
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