Using family money - are there agreements in place?

[Miles Stanley]

Hello,

I have a deal lined up and a family member has agreed lend me the full purchase price, interest only, for about 2 years while i make repairs and position the property for resale.

I don't object to using their cash, but my question is how does this need to get handled legally and/or on paper?  I'm on the verge of writing my offer (or my agent will rather), and the deal is cash only.  

How does the private money get factored in at closing?

Is this just a verbal or napkin agreement i make with the family member and it just gets done (surely not), or is this something that gets lawyer-ed to death and recorded in the public records?  

Do they just cut me a check for the purchase price?  

How does the tax man look at this transaction?

I love the appeal of OPM, but i tend to get hung up on the paperwork aspect of things.

Thanks,

[Daniel Dietz]

We have a mortgage written up by an attorney, which is recorded as a 'lien against the property' (I believe that is the right term) so they are secured by having the right to foreclose on the property. To me, the closer the person is to you the more you need to get it in writing ;-) I have seen too many families torn apart from 'misunderstandings'. 

This goes for whether it is a First Position (primary) or a Second Position as part of a down payment. 

And absolutely the appeal of OTP is huge :-)

Dan Dietz