Expert: Jessica Bryan - 7/20/2007

Question
QUESTION: My husband and I want to buy a friend's house and want to do an assumption loan with them. They do not care if they make anything on the house, because they have just purchased a new house in a different area and would just like to be free of a second mortgage payment. They have 5 more months of a contract with a realtor, can we do an assumption loan while under contract? And if so does the realtor get a commission if no money is actually being exchanged? What is the law in Maine about this if any?

ANSWER: As long as the home is changing hands and a new deed is issued the home is considered sold.  The law in Maine is not an area of my expertise so I cannot say if the REALTOR will get a commission, but I would think that the listing agreement is very clear on this.  Your friends should check the agreement and see what it says, then consult with the closing attorney.

~Jessica Bryan

---------- FOLLOW-UP ----------

QUESTION: Thank you for your prompt reply! Also, if we were to rent until the contract expired and then do the assumption loan is this ethical? Thank you!

Answer
Hi Claire;
It is okay to rent first and then assume the loan later.  As for ethics...well, if it means that you are cutting someone out of a commission it is a matter of conscience. Again, the listing agreement may cover rentals as well since it is basically a rent-to-own situation.  You should be very cautious about this.  The listing agent has the right to expect a commission regardless of who buys and how they buy the home. Some listings have a clause that states that if the home sells after the listing expires within so many months (date is usually specified) that the agent still has the right to the commission.  The exception, of course is for a rental.  If the seller chooses to tell the agent that he has rented the home and if there is no verbiage about compensation in the listing agreement then it is possible to avoid paying the commission.  However, since the seller is essentially breaking a contract, there should be mutual agreement and the agent should be releasing the seller from the contract without any further claims for compensation.  If the agent doesn't do that, the contract is still valid.  Again, I urge the Seller to contact his/her attorney.
~Jessica Bryan