Expert: Karyn Foley - 8/12/2008

Question
Recently we put in an offer on the home of our dreams, but hit a dead end when the seller told us that she would not consider any offers from anyone that had not already sold their home.  We have been scrambling to see what we could do when we found out that friends of our's, who adore our house, were suddenly in the market.  We do not want to "sell" them the house, but simply give it over to them at our payments, which is less than what they could finance.  We had orignally been told about giving over our loan, but then told that it is not legal to do this anymore.  However, today I was told about selling a house "under contract".

Under contract was described to me as basically they pay us the monthly payment and then we pay it to the bank.  There is a contract involved which covers both sides and would normally have a balloon in it that states that after a set amount of years, they finance for the amount of the loan at it's current state.  It would also state that their payments during the course of the contract would be considered a down payment for the sale of the home to them.  

I have spoken to several people at work about this, none professionals, and several have done it or know someone who does.  However, I can not find any proper information on it on any websites.  I was told by a person who had done it before that there is websites to actually download the contracts for you to fill out and then have noterized, but again I can not seem to find them.  Is this all whispers in the wind or am I just not looking at the right sites?  Any advice would be greatly appreciated, especially if helps both us and our friends into the homes that we desire.  Thank you.

Answer
Dear Franklin:  This sounds like a land contract to me.  If it is, then you need to consult a real estate attorney.  It can be too problematical to go through a website!  Even if one would quit claim a title to a property, then are still held accountable to any loan they have already placed on the property.  Your buyers need legal support as well.  You need protection assuring you of payments by your buyers, info on tax ramifications, and the buyers need protection of verifying their payments are used to pay off the loan and how and when they can claim clear title.  This is not for a novice.  Any money you spend would be money saved in the long haul.
Todays sellers do not want any buyer who has not yet sold or rented his own home.  Even if you rent it, the rules are getting very strict about confirming that lease and getting the lease notarized, and usually require you to have thirty percent equity in the home you rent.