Expert: Dick Dennis - 3/8/2011

Question
My mother in law no longer wants her home and would like to sell it to my wife and me.  We sold our house, moved in and are ready to buy (my mother in law is now in a condo).  She plans to sell us the house for what she owes on the mortgage ($70,000 less than the value of the house).  During the process of getting a mortgage, our mortgage rep offered out the idea of just putting our names on the deed and then refinancing.  He said that we could just deed her out eventually and then we would own the home.  Does this make sense to do?  What are the pros and cons?

Thank you,
Andrew

Answer
It's a legitimate way of doing it, Andrew. By taking over your mother-in-law's mortgage will work in this economy because banks are not anxious to foreclose these days (technically, banks can indeed object and then foreclose when someone else than the original borrower takes over). Yes, in days gone by banks objected to a new borrower without their permission. However, if you continue to make the payments (taking over your mother-in-law's obligation) then one day in the future when you decide to refinance your mother-in-law's interest (as the borrower) out of the property, they will see that you had a good paying record and will readily make the new loan for you.

Just a couple caveats, though. It should be a simple matter for a good real estate attorney to put together an agreement that does indeed give you recorded ownership in the property. I don't know how long she has owned the house, but your mother-in-law may have obligated herself for a lien or two other than the original mortgage. Yes, it is possible that there might be a lien or encumbrance of some kind WITHOUT your mother-in-law's knowledge. That means YOU would be obligated to pay or be responsible for any liens or encumbrances. By doing it this way, you take over the house with some peace of mind.

By taking over the responsibility of paying your mother-in-law's loan, it is simple enough. But it should be in writing what was agreed to in taking over the property. In real estate, if it was not in writing, it was never said. People have a way of forgetting what they said.

There are a couple other ways of doing this, Andrew, but if it were me, I would visit the real estate attorney's office. I do wish you well.

Dick Dennis
dixiedee13@aol.com