Buying House from Parents

2 Replies

My parents recently built a new home and moved out of the house I grew up in throughout my childhood. They listed for-sale-by-owner for about six months with a lot of interest and went under contract twice, but the buyers weren't able to close. Earlier this year, my fiance and I decided we wanted to buy the house. (In Texas if that makes any difference)

There is currently a mortgage at about $80k, the home was appraised for $165k, and we've negotiated a sales price of $155k. Neither I nor my parents can pay off the mortgage immediately, but within 2-3 years we would be able to. 

What's the smartest way to buy this house to minimize transaction costs?

I've read forum posts here and elsewhere that advocate a number of strategies from wrap-around owner financing to using quitclaim deeds. But I haven't found someone in quite the same situation I'm in. 

Do your parents need the equity? Can they carry a second mortgage. The lowest transaction cost would be to leave the existing mortgage in place through either a sub2, wrap or lease option. You would just need to figure out how to pay the existing mortgage off and how to pay your parents their equity.

Steve,

Thanks for your reply!

My parents don't need the equity immediately, but I'd like to pay it out to them within the next 10 years before they retire.

Could you provide some links on the options you mention (sub2, wrap, lease option)?

I previously looked at a lease option, but read that this has become much more difficult in Texas due to recent changes in the law.