Posted by John Merchant,JD on July 18, 2002 at 09:43:31:
Absolutely, and this is the cleanest and most above-board way to do it. Get written agreement from the note holder/mortgagee to release the Seller and substitute the Buyer as the now-debtor.
Realistically, this is normally only going to happen with the private note holder and not the “bank” because institutions just generally don’t want to release any debtor, once they’re mid-stream with a loan; however, it never hurts to inquire, and you may find that if you “sweeten the pot” with an offer to pay the note holder (individual or institution) some modest amount for such a release it just might be accepted and a release might be agreeable.
The institution will want to pull credit of new borrower, and so will the savvy individual note holder.
Of course it’s best, legally, to totally and openly disclose in writing to the Seller that with the proposed assumption by buyer, the Seller will remain liable on the note and in case the buyer gets into trouble later and cannot pay the note, the lender will look to the seller to pay it.
As lawyers have advised their clients forever, if the would-be buyer would just tell the seller, in writing, every bad thing that might happen, concealing and hiding nothing, even if it were to cover a dozen pages, that buyer would STILL get many motivated sellers’ signatures on the dotted line, because those sellers are MOTIVATED (!) and would sign anything!
Done this way, if/when the buyer does get into later problems and cannot pay, the seller now has no complaint or recourse back against the buyer for failure to disclose.
I confess I’ve had problem properties which I would have sold this way, because I was so sick of dealing with the problem that I would have GIVEN the property away or taken ANY deal.