Expert: Dick Dennis - 6/5/2009

Question
I am out of work and have a 2nd home I would like my daughter to take over the note on the home and put it in her name she filed bankruptcy 2 years ago , do we have to get another loan or can I just give it to her ,the property is not paid for.

Answer
What I am about to disclose to you, Ted, I highly recommend you have a real estate attorney handle for you to make sure your and your daughter's interests are protected.

Your loan on your 2nd home is not assumable, although you certainly may "sell" the property to her for whatever price you choose. But be aware that her tax basis in that property will be at the low price you sell the property. Therefore, when she sells the property sometime in the future, she will have a taxable gain subject to the existing tax gain foregiveness (up to $250,000 for a single person or $500,000 for a married couple filing jointly who live in the property at least two years). Now here is the part that is touchy and a good real estate attorney should be able to handle for you --- taking title "subject to" the existing mortgage.

"Subject to" means that the party who buys the house, buys it "subject to" the existing loan, meaning that she does not become responsible for the loan (you still are). Typically, a bank would object to someone taking over the payments of the mortgage without applying for assumption or refinance. But in this economy, most any lender will not pursue that remedy as long as your daughter does keep up with the payments, regardless if she had a recent bankruptcy. In fact, it is good thing for her to get around that which is a bugaboo on her credit. So, you would be helping her while you are helping yourself. A good real estate attorney will be able to explain it in more detail for you, Ted. I do wish you well.

Dick Dennis
dixiedee13@aol.com