A few months ago I was talking to a friend who is not super sophisticated when it comes to real estate. He wanted to buy a house that was around 120k on the market (that's what the same house was on sale for across the street). The property was going to go to auction because the person who "owns" the owed a lot in back property taxes. He brought up the concept that the owner only owns the deed but that he had paid 8k for the house just three years earlier
A few weeks later I asked him what's the latest with the house and he said that the supposed owner of the house only owned the deed but not the house itself, and therefore had no rights to the house?
This does not make sense to me. Is this possible?
When I think of a deed I think of the legal owner of the house. So for instance the bank owns the deed to my house since I have a mortgage with them and then in 30 years when my loan is completely paid off I will then own the deed.
No,the bank has a mortgage, or trust deed (a lien) on your home. The deed is in your name, which means you own the real estate/house. The deed in one's name equals ownership of the property....assuming a legitimate transfer, and not complications/issues with a Quit Claim Deed.
@Wayne Brooks is correct. It may be helpful to think of it this way...
You own the property. The deed is in your name. However, the property has been pledged as collateral against a loan...the mortgage. Therefore, your ownership is not free and clear, but you are the owner of the property.
This sounds like it may be a Life Estate situation. Where it is possible to own the property with your own name on the deed, but through other agreements filed with the deed. You do not have any controlling interest in the property until someone dies (usually). It will give you the right to do several things like, take out a loan, repair the property, even sell your rights to the property but not the property itself.
That deed would not be enforceable until the other party has passed away, or declared legally a ward of the state. For more information about "Life Estates" contact a local attorney there in Minnesota, as the laws will be different concerning this type of transaction than the laws in Texas.
I have seen these pop up from time to time at my office, because people are trying to avoid estate taxes for their heirs. They retain control of the home, but have essential given their home to the recipient before they passed while retaining the rights to use the home.
What Richard D is telling you is you can buy the house and own it but the person with the life estate has the rights of possession until they die, but you can buy these rights and the remainderman's interest then you will own the whole thing just like a regular deal. So check with the occupant and find out the real skinny. I have bought a few of these. Twice I left the life estate holder interest alone. One was 86 and looked like she would die next week. Well she almost lived to one hundred. So no income for a very long time. Still came out well because of soaring prices in that area, but you can't count on that. Another time a daughter moved in during the time her mother was in a home and thought she had the right to stay there after her mother died, but I had to tell her differently. It was almost a year before I found out the mother had died.
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