Buying house from close friend strictly cash on monthly payments

8 Replies

So a friend of mine bought a cheaper home with the thought of renting it out some day. He gave up on that and offered to sell me the house strictly cash. We don’t have a bank involved, we’re strictly on the honor system and I make monthly Payments. I do have my name on the deed with his. My question is when I do finish paying the house off in the next couple months what issues might I run into when getting the deed in my name. Does he just “gift” me the home or do I include my total payments to a title company I’d assume. I’m just not sure what to expect when it comes to getting the deed entirely in my name.

Originally posted by @Nick Cox :

So a friend of mine bought a cheaper home with the thought of renting it out some day. He gave up on that and offered to sell me the house strictly cash. We don’t have a bank involved, we’re strictly on the honor system and I make monthly Payments. I do have my name on the deed with his. My question is when I do finish paying the house off in the next couple months what issues might I run into when getting the deed in my name. Does he just “gift” me the home or do I include my total payments to a title company I’d assume. I’m just not sure what to expect when it comes to getting the deed entirely in my name.

He should first sell it to you before you start making payments. Take title in your name, give him a Lien for this security for the note you are going to carry and then make those payments.

He wouldn’t gift his half, he would deed it over to you....usually a QCD. Hopefully you have had a title search done to make sure there no liens on it.....caused by your friend or the previous owner(s).

Exactly what are you trying to find out? How to report the sale?

When you say "cheaper home" are we talking $8,000 or $75,000?

If you plan on renting it, you'll want some type of record of the monies you've invested into it for establishing your depreciation basis.

If the "cash purchase" is an attempt to avoid taxes, that can come back and bite someone later so may as well keep everything on the table.

@John Teachout 35k will be the purchase price. I’m not avoiding taxes by any means. This is why I’ve started this thread. I want to get it taken care of correctly and legally for my benefit jn the future. I do plan to rent out the house as well shortly after paying off. Thanks for info. House is currently quick deed in both our names (I think that’s the correct name for it )

@Wayne Brooks I do need to look into title then. I believe everything is fine and up to par. The house was purchased 5 years ago paid in full. And I also keep the property taxes up to par. But I should def check the title. Thanks

If you and your partner only have a quit claim deed for the house from when you purchased it, you probably want to go back and try to get a warranty deed. A quit claim is not a very secure way to purchase property as it is a means for someone to transfer their interest in a property to another. A quit claim is commonly used in the example you cited when a property is owned by more than one person and then one of the parties is transferring their part to the other person(s). Commonly used in divorces when a spouse transfers their ownership to the other spouse.

But only receiving a quit claim deed when you're buying a property leaves risk that there are others that have an interest in the property as well. So warranty deed with title insurance is a much more secure way to ensure you actually own everything you think you own.

First, you need to have a professional title search completed and then, you need to ask the title company if it can deliver a clear Owner's Title Insurance policy to you should you purchase the property from your partner.

I agree with Ashish Acharya in that the safest transaction for you is to treat it like a purchase where you would pay him the down payment and the property would have a lien on it until you pay him off, along with a title company serving as Escrowee so that it can issue you an Owner's Policy.

Worst case scenario is that you give your Partner the money and you learn (a)  there are legitimate title issues that exist like unreleased liens or breaks in the "chain of title" and (b)  your partner's judgements/liens/creditors could attach to the property putting your ability to take clear title at risk.

Good luck.     

First things first, you need to make sure you have clear and insurable title. Then you can have him deed it to you and record a deed of trust against the house.