Letting the owner stay for free

[Shanequa J.]

I came across a house in one of my areas. The owners are old, late 80s, and they owe $5600 in property taxes. I would like to offer to pay their taxes and let them live their for free if they signed the house over to me. The house is worth around $60000. Is this a good plan? I'd feel like the grimm reaper because I'd be waiting for them to die.

[Jon Holdman]

This type of situation is called a "life estate" and isn't too unusual. More common with family members, though.

Were you to do this, you would need an agreement about exactly your responsibilities. For instance, you now own the house and their tenants. If the furnace fails, its almost certainly your responsibility to fix it at your costs. Or a roof leaks or a plumbing problem. What about other more minor repairs? Do you take over all taxes and insurance?

Life expectancy for a 90 year old female in the US is almost five years. So you should reasonable expect to pay all the costs for five more years and not get possession of this house until then. What if they live another 10 years? You will have paid (at least) $56K in taxes, plus insurance and maintenance. In ten years you're probably looking at some pretty serious repairs.

Are there any family? What do they have to say about the deal?

Essentially, this is a reverse mortgage. They get their taxes, insurance, and maintenance paid on the house and you get it when they die. Are they any laws or regulations that cover this type of deal in your state and area?

Consider what you would think if they die a week after you close on this deal and then the local newspaper prints a story about the deal on the front page. Does it look like you stole the house? Or that you were helping them out and it was a fair deal?