In Law's Upside Down Mortgage, What are my options?

In Law's Upside Down Mortgage, What are my options?

Manchester, CT · Member since 2018 · 3 posts · 1 vote

Hey everyone-

This feels like a unique circumstance, but I'm sure SOMEONE out there has experienced something similar. Welcoming any advice or ideas on the matter. I'm pretty new to the real estate game and am very open minded to options here! Thanks for taking the time for me.

My in-laws are going through a very rough time with many health issues, family deaths, and my FIL was laid off not too long ago. They are struggling to keep up with their mortgage, but are up-side down on their loan (I apologize I don't have the numbers on this one). They're not able to sell at this point but clearly cannot afford the monthly cost to stay. Some significant work would need to be done to sell but could be rented for a reasonable amount of money (which I can afford to do for them). I'm looking into helping them rent it and find a simple quaint apartment in the meantime that would allow them to catch up on all past due bills while still making progress to get on top of their mortgage. I'm also looking for any ideas about transferring ownership to us, or selling (without an agent) to us down the road. I just closed on my home a couple months ago so wouldn't have a down payment to execute that sale now. I'm seeing a lot of info about Due on Sale clauses and am curious about others experience about the matter.

I apologize for the lack of specifics but welcome any advice and things to research into! Thanks in advance! 

0Reply
14 views

2 Replies

Jump to latestLatest
  • Attorney · Austin, TX · Member since 2019 · 128 posts · 98 votes
    7y

    @Amy Bellone Hello, Amy. There may be a work-around by having them transfer the property into a trust/llc structure that would leave them in control(thereby not triggering the due on sale) and give you control of the property as well. A transfer to another person will trigger a due on sale clause and should therefore be avoided, even though banks are hesitant to ever foreclose as long as the note is being paid. While the banks may not foreclose, they will still send threatening letters. This issue can be avoided completely by transferring the property into a land trust that your family could then be co-trustees of either directly, or through an LLC(for better liability protection).

    While a transfer to a person will cause alarms at the bank and prompt them to send a letter, a transfer to a trust will not. A transfer to a trust is exempt from due on sale violations since banks will view transfers to a trust as an estate planning tool. You should not even receive a letter from the bank. Your family could then control the property through the land trust as trustees's, either individually or through an LLC.

    Please feel free to connect with me if you’d like to know more.

  • Manchester, CT · Member since 2018 · 3 posts · 1 vote
    7y

    This is awesome info. Great place to start! Thank you so much @Weston Couch

Join the conversationCreate a free account to reply, vote on answers and follow this thread.