So today me and my neighbor were talking and she wants to sell her house to me but she said she is upside down and wouldn’t have anywhere to go if she did sell as she is retired and has limited income.
So I offered to pay her 35k the place is worth about 72k and we would agree she live out her last days and when she is gone I would take it over.
Does this sound like a good deal she would still pay for property taxes insurance and everything. I could still use the property for a Heloc as I would own it free and clear. What are the downsides to this for me ? And her just want to see it from all angles
Plus you really want to be careful about giving someone a life estate in property. They will not insure you, only themselves, if they even buy insurance and the do not spend their money on maintenance. The place will be your new money pit.
Plus people live a long time now.
MY neighbor is a schemer. She went 1/2 on a very expensive lawn mower with the stipulation that an elderly neighbor paid for 1/2 and she will mow his lawn for the rest of his life. And the lawn mower is hers when he passes away. He was 92 years old when they made the deal. His daughter was furious. Well now he is 95 and doing quite well. Drives himself from TN to KY and back when he wants to visit. And she HATES doing his lawn each week! I am rooting for him to live to 110 just to do her in.
Save life estates for your grandma, or very close relatives, not neighbors.
So today me and my neighbor were talking and she wants to sell her house to me but she said she is upside down and wouldn’t have anywhere to go if she did sell as she is retired and has limited income.
So I offered to pay her 35k the place is worth about 72k and we would agree she live out her last days and when she is gone I would take it over.
Does this sound like a good deal she would still pay for property taxes insurance and everything. I could still use the property for a Heloc as I would own it free and clear. What are the downsides to this for me ? And her just want to see it from all angles
It's an interesting solution to her problem. If she is "upside down" that means she owes more than it is worth. That loan doesn't go away just because she sells the house to you. Someone has to keep paying the mortgage payment. You would owe whatever her loan amount is plus whatever ($35,000?) you give her. That would mean you are way into debt on the property . Also, you would need to have everything in writing, decide on who takes care of maintenance (new roof, broken appliances that sort of thing), what to do in the event she has a medical emergency, but if she is "upside down" on the property then there is no equity and you couldn't get a HELOC.
So if the place is worth about $72k and she is upside down then she owes more than $72k. If you pay her $35k, then that will go towards paying off half or so of her mortgage. She would not be getting anything in her pocket. The mortgage company would not go away. They would expect a monthly payment from her. You could not close with title insurance because the mortgage company will still have this mortgage.
OR does she expect $35k in her pocket and you owe all the mortgage?
When you buy a house you have to pay off the old mortgage or get them to agree to a short sale. They will NOT agree to a short sell with a tenant left in place or for 1/2 the value of the house. Short sales end up being pretty much at market value.
So you would really be paying her the over market value 'upside down' amount on her mortgage as well as $35k extra to get clear title. So you are overpaying on the house by the upside down amount plus $35k.
There is no equity for a HELOC loan at all, you are way more upside down.
Do you know that the old mortgage does not just go away? Do you know what upside down means?
Plus you really want to be careful about giving someone a life estate in property. They will not insure you, only themselves, if they even buy insurance and the do not spend their money on maintenance. The place will be your new money pit.
Plus people live a long time now.
MY neighbor is a schemer. She went 1/2 on a very expensive lawn mower with the stipulation that an elderly neighbor paid for 1/2 and she will mow his lawn for the rest of his life. And the lawn mower is hers when he passes away. He was 92 years old when they made the deal. His daughter was furious. Well now he is 95 and doing quite well. Drives himself from TN to KY and back when he wants to visit. And she HATES doing his lawn each week! I am rooting for him to live to 110 just to do her in.
Save life estates for your grandma, or very close relatives, not neighbors.
@Jermell Shavers As the others said, if she owes more on the house than it is worth, why would she sell a $72K house for $35K? The bank will still want the money it is owed. If she has limited income (everyone does, but the question is how much), would she be able to pay the property taxes? Then there come the question of how long will she live in the home.
@Mike M. Correction she owns it’s free and clear she just can’t sell it and be able to move I made this late night sorry about that. It’s worth about 72k I’ll purchase it for 35k.
@Mike M. Correction she owns it’s free and clear she just can’t sell it and be able to move I made this late night sorry about that. It’s worth about 72k I’ll purchase it for 35k.
That makes a huge difference. You could put this together and make it work. You ARE taking on the responsibility of watching over her for the next whatever number of years though. If you are okay with that you would have an attorney put all of the paperwork together.
@Mike M. I’m trying to make it work she will pay all the bills in the house and I’ll take a Heloc out on it and with the built in equity I’ll get a duplex that will pay for whatever bills come up in this tiny house but overall I think it will be good deal for me even though it’s not gonna be producing an income while she lives there.