Creative Purchase / Sale Agreement

[Susan McBride]

I am considering doing a creative financing agreement whereby I will sell my home to a buyer with a $20k non-refundable purchase option.  He would pay my mortgage payment and assume all responsibility for home maintenance until such time as he can qualify for financing.  At that time, he would pay whatever the remaining balance was on the mortgage and would waive his right to inspection.  So, he will reap the benefit of the reduction in P&I on the loan over time.

If he is unable to obtain financing in one year, it would revert to a six month lease and he would be required to pay a damage deposit at that time.

I am calling this an "Agreement of Intent to Purchase Residential Property" and not a Lease / Purchase Agreement. I am attaching a lease as Exhibit A which will be the lease if he is unable to obtain financing to purchase it. The Agreement also states that he will be subject to the terms and conditions of the Lease Exhibit A while living in the home.

I have two concerns:  1) in this type of arrangement, would I be able to evict him if he defaulted on the payments? and 2) would I have to declare rental income if the agreement stated that he was paying the mortgage (instead of rent) until such time as he could get a loan to purchase it.

Advice and comments welcome!  Thank you!

[Nathan Gesner]

Quote from @Susan McBride:

You should talk to an attorney to ensure you have this set up correctly. I would hate to see the buyer default and then discover you lose everything because your contract wasn't set up correctly.

Yes, you can terminate/evict as long as your contract is set up correctly.

The tenant/buyer should not pay your mortgage. They pay you, then you pay the mortgage.

If I understand correctly, you are selling the home for the remaining mortgage balance + $20,000? Is that market rate? I wouldn't even consider this option unless you are getting what the home is worth.