Posted by Bill Gatten on December 07, 1998 at 20:34:32:
Land Trust (i.e. “PACTrust”)!! Here’s what I do when this happens (“dufus” eh? Appropriate phraseology here). I play Mom?s game and say the following:
Me: “No problem Maaam. What I’m willing to do is NOT take any title interest in the property at all until I can take your daughter completely off the loan. We’ll set up a trust for her, in her own name and let her hold the property in own trust making me a co-beneficiary, so as not to violate the lender’s due-on-sale clause; and so that she doesn’t have to take any chances with me. In the meantime, I’ll pay for 100% of all payments, maintenance, repairs, upkeep, property tax, insurance, Home Owner?s Dues, PMI insurance; and baby sit her children and feed the dogs. Then in about six months to a year, I’ll put a new loan on it or refinance it and take her complete off the loan at that time.”
Obviously in doing it this way, you have 6 months to a year (or more? whatever you agree on) to market the property, sell it and pay off the old loan. The Mom and daughter are secure that there is no chance that your potential problems (personal or financial) could ever embroil the house, or that the dreaded Due-on-Sale clause could be violated.
I might even sweeten it a bit more (costs you nothing, but sound most magnanimous) … tell Mom that you?ll only take a 10% interest in the trust and that her daughter can wait to forfeit the other 90% to you at the end of the trust, when you put the new loan in place. Despite your percentage of beneficiary interest, this gives you 100% percent of ALL the benefits of ownership, including all tax deductions, principal reduction, appreciation, use, possession, water rights, etc., and makes the seller VERY comfortable. And? since a 3rd party unrelated trustee holds the title, she cannot change her mind, alter or thwart the Beneficiary Agreement in any way.