Paying seller over 2-3 years (so he won't lose his food stamps)

29 Replies

Firstly, I'm not asking for legal advice, so any replies don't need a disclaimer :)

A seller I'm buying a house from is concerned about becoming ineligible for food stamps and Medicaid when I buy the second property on his land due to receipt of a large sum of cash.

I'm paying 30K to him and 30K to his sister. He asked if there was a way I could pay him $1000 a month over an extended period instead of all upfront so he could keep his benefits. Can an uncomplicated contract be written up for an arrangement like this?

I just went through a similar scenario (although somewhat different than your people actually holding a note). 

5 years ago I sold 2 rental properties to a couple who just fell on 'hard times'. I hold the Note(s) on both & having exercised the signed assignment of rents I 'reluctantly' manage the properties.

We collect the rents ($2300) & the 'income' is used for maint/repairs, tax etc escrow & anything left is used to pay down their mortgage(s).

Several weeks ago I received an inquiry from Social Services to pre-qualify this couple & kids for 'free' Health care. I had to fax a letter to the woman at SS explaining the assignment of rents concept. She then responded with several inane questions but was satisfied that the couple were NOT receiving income from the properties YET their mortgage(s) is being paid down???

A week later I received a phone call from yet another division of Social Services to qualify the couple for public assistance, including food stamps, Heap etc etc. This woman ask me many of the same questions but could not access the letter I had previously faxed the earlier woman regarding the Healthcare issue & who sits down the hall. I spent 10 minutes explaining the concept of an assignment of rents. Her interpretation was "OK I get it they don't receive any money because you collect it & keep it". OMG !!!

(I often wonder how they report the rentals on their respective tax returns???)

I am told the couple have since qualified for both free healthcare & public assistance & will eventually own $200K in property paid for by 'rents' they don't touch!!! 

Obviously use an attorney, but it's fairly simple and straight forward.  The seller will be carrying a mortgage for $30k, after your $30k down payment.  $60k purchase price?  Do it as a regular sale, not a Land Contract/Contract For Deed, with the seller carrying the $30k mtg.  The mortgage gets recorded just like any other mortgage.   Use a Warranty Deed, not a QCD.

This thread eiptomizes the problem we are facing in this country. It's insulting to those of us paying for these freeloaders. What a disgrace. 

Originally posted by @Ryan R.:

This thread eiptomizes the problem we are facing in this country. It's insulting to those of us paying for these freeloaders. What a disgrace. 

You bet.......so keep paying your taxes.

My investor partner has a rental that Section 8 subsidizes ($65/month) towards the $650/mo rent for a single woman 'struggling' in a mediocre job. 

She got fired for theft & now unemployed (& awaiting a trial) Section 8 is paying my partner $750/month because she also took in her aging mother ?????

Great system !!!!

@Pat L.  The system is rewarding failure and laziness and is penalizing success and hard work. 

I'm all for helping people who need it; but this system is isn't helping anyone. It's putting a strain on the producers and giving the takers a false sense of reality. 

I agree with all of the above replies about people abusing the system.

In my sellers case, I feel he is in genuine need. He is nearly 80 with various health problems, recently spent 4 months in hospital and has no income. He was playing the piano at the church on Sundays for income but they found someone else to replace him when he was in hospital. He doesn't qualify for social security as he owns a vacant plot of land in South Carolina. The man has a $10,000 credit card debt currently as he needed to pay bills.

I'm taking him to the hospital today for another appointment and have been taking him food. His own house is absolute squaller and he doesn't even have an AC in the overbearing Miami heat.

I'd also like to mention that he is a lovely, honest and extremely moral human being. 

I've almost never seen anyone in such genuine need who isn't getting the assistance he should be.

Since when does owning land disqualify a person form SSI? Unless the value is such that he doesn't and shouldn't qualify for SSI.?

Food Stamps are for people whom are poor. Not for people who sell houses and pocket $30,000. 

So why doesn't the church where he was playing piano help him? Surely someone there knows that he is in need.

This post has veered way off course.... not unusual. 

I find some of the replies incredulous.

No point in continuing.

Originally posted by @Ryan R.:

Since when does owning land disqualify a person form SSI? Unless the value is such that he doesn't and shouldn't qualify for SSI.?

Food Stamps are for people whom are poor. Not for people who sell houses and pocket $30,000.

 I am not from the USA so I can't speculate on exactly how social security/welfare works. 

The old man (let's call him 'John') told me there is a question in the application form which asks 'Do you own any other property apart from your primary residence?'. As he answered yes, he was ineligible for government assistance. 

Both the vacant plots of land and his primary residence, he inherited from his father. He's half blind, has no children and no income......and 80 years old.

I find your comment 'Food Stamps are for people whom are poor. Not for people who sell houses and pocket $30,000.'

John is almost as poor as it gets. Minus his $10,000 credit card debt and the $30,000 from the proceeds of the sale becomes $20,000. So he 'pockets' a whopping $20,000 and you're suggesting his wealthy? 

I hope he buys some new clothes because when I took him to the hospital today his T-shirt and jeans had dozens of holes.

If you are not from the US you may not be aware of Adult Protective Services. There is one in the social services dept. in every county.  If you really feel that the seller isn't getting the aid he deserves, or if he has food, shelter and health needs that are not being met, it's an emergency and they should be alerted. If his house is unlivable, if he needs clothes, if he is not able to manage his income/assets or his benefits properly, then he needs the help of a case worker at social services

Additionally, I'm assuming you are not aware of how food stamp and Medi-caid benefits are affected by income. Even if the seller sells his half to you with seller financing and receives $1K per month, that amount would most likely eliminate all or most of his food stamp allotment.  Indeed food stamps are for those reporting hardly any income.  $1K/mo for a single person is a fortune in the world of reported welfare income. 

I'd get him the public assistance attention he needs before you buy the property.  Let him and social services work out the details of how the income is reported, and let them explain to him how his benefits will be affected.

@Nat Chan  , as you've no doubt learned, many people in this country lose all sense of proportion and perspective when they hear words like "food stamps". I am also incredulous that a strapping young man with plenty of advantages can only see a poor struggling 80 year old man as disgraceful freeloader. Using that criteria, I'm not exactly sure where that line of "people who need it" would even start.

@Nat Chan   I can understand why you want to work with this mans situation. In order to get food stamps and medicaid a person has to meet a certain income threshold. If they go over that, they can lose all or part of their benefits. I don't think his Medicaid would be impacted, but his food stamps very well could be. Maybe you could pay off his credit card debt for part of the purchase price, buy him new clothes, and possibly get him an air conditioner,stock his pantry, and then do the rest on a note? 

Either way, you are a kind and generous person, and I hope it all works out for you, and him. 

Just  a reminder:

Keep the topic on point. No politics , morality views, character assassinations please.

The world is a colorful place and we all see things through a different filter.  

Nat a concern I would have is someone that age being of " sound mind and body " to enter into any contract with you. A judge could void the sale if they feel that the seller did not have capacity to understand the totality of what they were doing. At closings if an attorney or title rep. if they feel uncomfortable about the whole thing they might not even do the closing.

We all take into account business entities, taxes and different types of deal structures to make sure we keep as much money in our pockets all within the confines of the laws. As real estate investors we are extremely lucky in that there are plenty of tools and tax breaks at our disposal to allow us to pay less taxes than people with 'normal' income jobs. If theres a lawful opportunity for you and the seller to structure a deal so that he still maintains his benefits, then great, everyone wins. As Mitt Romney said - you'd be stupid not to take advantage of the options available to you (on why he only paid 13 percent taxes)

can't believe I just quoted Mitt Romney,

Originally posted by @Jean Bolger:

@Nat Chan  , as you've no doubt learned, many people in this country lose all sense of proportion and perspective when they hear words like "food stamps". I am also incredulous that a strapping young man with plenty of advantages can only see a poor struggling 80 year old man as disgraceful freeloader. Using that criteria, I'm not exactly sure where that line of "people who need it" would even start.

 I'm incredulous that you believe an 80 year old man who has real assets that exceed the limits set forth by the federal governement for receiving benefits is poor. The whole question here is one of fraud; how can the buyer launder money to this 80 year old man without the federal governement finding out. 

And yes, any person who has their own money, such as $30,000, and decides to take food stamps is disgraceful. Nothing is free, not even food stamps. When a person uses food stamps, they're taking food that someone else worked to provide for. That's a serious act and it should only be accepted in the most severe situations. 

Originally posted by @Chris Martin:
Originally posted by @Ryan R.:

Since when does owning land disqualify a person form SSI? Unless the value is such that he doesn't and shouldn't qualify for SSI.?

http://www.ssa.gov/ssi/text-resources-ussi.htm

clueless.

 Hey Chris, you ever hear of a rhetorical question? You're obviously clueless!

Originally posted by @Nat Chan:
Originally posted by @Ryan R.:

Since when does owning land disqualify a person form SSI? Unless the value is such that he doesn't and shouldn't qualify for SSI.?

Food Stamps are for people whom are poor. Not for people who sell houses and pocket $30,000.

 I am not from the USA so I can't speculate on exactly how social security/welfare works. 

The old man (let's call him 'John') told me there is a question in the application form which asks 'Do you own any other property apart from your primary residence?'. As he answered yes, he was ineligible for government assistance. 

Both the vacant plots of land and his primary residence, he inherited from his father. He's half blind, has no children and no income......and 80 years old.

I find your comment 'Food Stamps are for people whom are poor. Not for people who sell houses and pocket $30,000.'

John is almost as poor as it gets. Minus his $10,000 credit card debt and the $30,000 from the proceeds of the sale becomes $20,000. So he 'pockets' a whopping $20,000 and you're suggesting his wealthy? 

I hope he buys some new clothes because when I took him to the hospital today his T-shirt and jeans had dozens of holes.

 Please show me where I suggest he's wealthy? Yes, $20,000 is suffiecient for one not to receive food stamps. 

@Ryan R.  You are missing the point of the post, and that is how to structure a real estate deal. Trying to structure the deal so that it doesn't mess up the sellers medical or other benefits whether they be public assistance or private is what was being asked. 

The original poster, having compassion for an old man; and taking the time to try to figure out a deal that will work to the benefit of the seller is not doing anything illegal, and certainly isn't laundering money, but trying to find creative solutions to a financing problem. 

The fact of the matter is, in Miama Florida, $30,000 is probably still considered below the poverty level. I am surprised at such a hard heart for an old man like that.

@Karen Margrave  No the point of the post is how to circumvent the rules in place. 

What about a heart for the young couple with three kids whom both parents work full time to support thier family in addition to this 80 year old man's food stamps? Where is their compassion?

How many families are out there struglling to make ends meet who don't have $30,000 in savings but are supposed to work to provide for this mans food stamps? How is that fair? 

Nothing is free. And that's the problem with these types of programs; it's subjective as to who really deserves it. 

"To compel a man to furnish funds for the propagation of ideas he disbelieves and abhors is sinful and tyrannical." - Thomas Jefferson

So back to the topic at hand.  I have a fair amount of experience working with sellers who receive various benefits that would be affected by the proceeds from selling property.  The seller in this scenario may have lawful options to mitigate the impact of the $30K on some or all of his benefits. For example, many times it's possible to gift the property to a relative such as a child, and then the child becomes the seller of the property.  The child then uses the proceeds for the benefit of the seller.  This is lawful in many cases and it's happening all day long in every state so that seniors can keep Medi-caid benefits.  The child would be taking on possible tax consequences from the sale, so there is a lot to consider

Seller financing is often thought to be a solution because it spreads the proceeds out over time.  It can sometimes backfire, though, as it creates monthly income for years as opposed to one big hit.  The one big hit can sometimes be a better option.  Social Services may disallow or reduce benefits for a short period after receiving the proceeds.  Where as reporting monthly income for years could reduce or eliminate benefits for the entire time the note is being paid off.

If the OP really wants to help the seller, she can hire an elder law attorney to look at his entire financial picture and then advice the best way to proceed.  If the seller is really suffering from poverty related issues with no friends or family to assist, it's an emergency and needs to be reported to Adult Protective Services.

Originally posted by @Chris Martin:
Originally posted by @Ryan R.:

Since when does owning land disqualify a person form SSI? Unless the value is such that he doesn't and shouldn't qualify for SSI.?

http://www.ssa.gov/ssi/text-resources-ussi.htm

clueless.

I think there is some confusion here on the difference between social security and SSI. The OP said the seller didn't qualify for "social security" because he owned land.  Social Security payments aren't based on needs or assets, so I assume she misspoke as she doesn't know the system.  SSI (Supplemental Security Insurance) is a different federal program that provides additional income to seniors in need and the disabled.  This seller in this case didn't qualify because he owned land.  Indeed, SSI is for severe need and you can't have assets sitting around other than your primary residence.