Title in my name, but owner still pays insurance and taxes?

Question

Currently working on a selling financing deal. Primarily, I manage STR’s for other owners.

One of the buildings I manage, the owner and I are figuring out terms.

I want insurance, taxes, and utilities to stay in the owners name. This will keep my payment to him the same, making things very simple. I’m just wondering if there’s a danger or conflict with that. For a little context, I pay him 3450 every month and rent it out for roughly 4450.

From the current owners perspective that might be weird, if he doesn’t have the title anymore and doesn’t know what the building it may seem strange for him to have insurance on the building. additionally, that may not protect me since I wouldn’t be the one holding insurance. Please advise. Thanks

Located in Minnesota

James Hamling · Answer

The two of you need a professional in this transaction, be it a facilitating agent or a Real Estate attorney.

All these terms your talking about, this is all standard stuff in a C4D purchase, and covered in our standard C4D terms contracts.

You both NEED someone in this because, as has been pointed out, neither of you is certain and in commanding knowledge of these terms, how to do them, the pro's/con's, risk's of doing such. This also opens up litigation potential down the road because one party could come back a time later saying they didn't understand ____ to it all and there is a new situation that makes a new issue that blows the whole thing open.

This can be achieved, as noted, with a R.E. Attorney or an agent who is willing to do a facilitator agreement. Yes, there is more then just the 1 kind of agency in MN, and facilitator is just that, to facilitate the transaction not lending exclusive agency to either side, loyalty is to the transaction itself, and the fee's charged are a lot less then normal.

Generally speaking, buyer should handle the insurance. There is too many variables in seller handling insurance, for example what if seller gets a ACV policy at bare minimum to cover himself, then you have a claim, next thing you know claim payout is only 48% of actual costs to complete the repairs. Your SOL. That's just 1 example, there is many pitfall potentials.        The other items, it's not abnormal for seller to hold but there needs to be competent understanding of such or else it's a setup for issues moment those taxes go up, and they will.

Again, you need a professional in the mix of this. It's one thing to get a deal closed, it's another to keep it closed without blow-back. The vast majority of suites in Real Estate are from transactions done WITHOUT a professional involved to facilitate, last I heard the numbers it was something like 92%+.

David M. · Answer

@James Bartlett simple might be good, but unrealistic.  If you are owning it, then all the costs are yours.  You should be figuring out what is the loan cost that is due the seller.  Just because you are doing seller financing doesn't mean that you can flip home ownership costs on its head.  Wouldn't it be great if we could all buy a property and have the prior owner pay for all the fixed costs?

And you need to learn a bit about insurance.  seller can't get insurance for something seller doesn't own...

Bill B. · Answer

Well, obviously you have to pay utilities, taxes and insurance if you’re buying the property. Property taxes are going to go up at the time of the sale. Utilities could be 1200 because of water leak and you could say, too bad, I don’t care, I’m not paying the utility bills so I’m not fixing it. Insurance would pay the current owner not you in case of any loss. Plus they would have an incentive to have the absolutely bare minimum insurance with a HUGE deductible, since that would be in you too pay for.

The seller should probably only give you an option to buy and not put you on title. What if you’re sued because of an at fault car accident or a rguakr accident at the property? It certainly seems like a lose lose situation.

Eliott Elias · Answer

You want to purchase the property and have the owners pay taxes and insurance? Not sure if I read that right.

Tom S. · Answer

@James Bartlett  James - just curious, what happened with this potential deal?

Don Konipol · Answer

As owner of the property you have an insurable  interest; as lender he also has an insurable interest.  The insurance policy is in the name of the owner as INSURED, with the lender listed as ADDITIONAL INSURED.The lender often collects an escrow for taxes and insurance and makes the payments to the taxing authority and insurance co.  There’s no legal or technical reason why utility payments can’t also be escrowed the same way.If by chance what you’re really intending to do is have insurance, taxes and utilities at a rate agreed with the seller and have the seller responsible for any rate increases thereby insuring your “margin”, that might be more difficult if not impossible to achieve.  Interestingly, most owners (investors) rather pay direct than through an escrow.  Has to do with control, use of funds, time value of money.  Many home owners/non investors rather use an escrow and not be bothered with budgeting, paying authorities, temptation to spend tax/insurance money.  you should be able to fairly easily work out whatever you and the seller agree toBased on the responses given above, it appears that people have read something into your question that I have not. Perhaps you can clarify what you’re trying to accomplish?

Theresa Harris · Answer

They should be in your name.  How are you going to know if they are being paid otherwise?  How is he going to get insurance to cover the property he no longer owns?

Title in my name, but owner still pays insurance and taxes?

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