Buying from Family?

Question

I have a possibility of purchasing a property from someone in my family. Has anyone had experience with owner financing and options on how to structure the deal? The property currently has around $200k mortgage and would appraise for around $800k. Any insight would be much appreciated!

Allen Fletcher · Answer

@David Bellmont

It really depends on how your relationship is with your family. I wrote the contracts with my family members and then sat down to explain every clause. I showed them how I tried to be completely fair and equitable in all parts of the agreement and they saw that I wanted this to not cause problems.

As Rick's questions; most mortgages have a clause in them that states that the bank can require the loan to be paid in full when the property's title is transferred to another person. This is one way that a bank can protect itself from having a loan go into default and they get stuck with a property. If you want to work a land contract deal make sure you get written permission from the bank that holds the mortgage note.

Does this help?

Allen Fletcher

Rick Maningas · Answer

What are the odds of the lender considering the land contract a sale (I don't know the relationships here) and evoking the due on sale clause of the mortgage?

Allen Fletcher · Answer

@David Bellmont

Make sure that you get everything in writing and that all parties understand the terms way ahead of time. I work a lot with family and have found that taking the extra time to make sure that the more important family relations are protected is well worth the effort. Once you have a written agreement and everyone is happy with the terms close the deal as a land contract at a title agency just like you would for a seller financed deal outside of the family.

Just remember that your family relations are more important than money, if it looks like someone will be angry if you make the deal pull out. There are always other deals, but you only get one family.

Allen Fletcher