Hi everyone –
I am writing this message for my dad. Although I am not a flipper (nor is he) I have come here and lurked for ages and feel you all have a good amount of information for even non-flippers. I’m hoping you can give some advice on the following situation.
My dad is 65 and plans to retire this year. He has one home that is completely paid off and he recently bought a much smaller home that he and my mom were planning on using as their retirement home (they were going from 3,000 sq ft 2-story to 1400 and one story). The new house closed about a month and a half ago and in that time, he decided that he may have made a big mistake. My mom’s not really happy with the smaller house and my dad thinks he has too much to do on the old one to get it ready to sell ASAP. To make a long story short, he’s feeling buyer’s remorse and doesn’t think he wants to move into the house.
The problem is, when he did the loan, he planned that this new house would be his primary residence as he was going to sell the other. What happens if he doesn’t do this? Will ge go to jail? Obviously I am very worried for him and I told him that I would get on here and ask the most informative people I could think of.
My dad also asked me if I wanted the house if he and my mom really decide they can’t move into it. Being single and in an apartment, this of course sounds like heaven to me but my first priority is making sure my dad is not going to spend his retirement beghind bars. No one would give me a loan (I work for myself with a new business) so selling it to me is sort of out of the question… at least for now. I can make the payments and would want to but this just all seems so confusing and none of us know what to do now.
Can any of you give me any words of wisdom? Any advice at all? We are honest people and the last thing anyone wants to do is break the law but we’re all terrified that’s what we’re doing!!
I do not believe the police are looking for 65 year old men who are out buying houses and then renting them to their son. I can tell your family is really concerned. I do not feel like loan fraud has been committed and even if so it would not involve jail time. The mortgage company may make you sell the house or repay the loan or change the interest rate or make you put more money down.
The best approach is to contact the lender and let them know the circumstances and let them know that you plan to live there and make the payments for your dad. I would can and then follow up with a letter. They will probably not have a problem.
Another option is to just do what is called a subject to sale where you get a deed and leave the loan in your dad’s name and you send them the payment without any contact with the lender. This is done all the time and the only real problem is the due on sale clause. There is a small possibility that the lender would call the note due but this would take time and you would be able to get another loan.
You have several options but jail for your dad is not one of them. Unfortunately even crooks doing this on purpose and even worse are getting no jail time, just stuff like probation and community service.
TEd Jr gave you sound advice on your situation and your dad should not have a problem since there is no intent to fraud the lender. Your dad will NOT get jail time.
The lender can however it title changes call the loan due but usually as long as payments are being made on time that probably will not happen.
YOu have several options and if you can afford the payment you can work something out with your dad as ted said you most likely at some point can look to get another loan.
The good thing is that your dad is not paying two morgage payments.
I have another solution if you can afford the payments then we can set the property up in a trust so that all parties are protected in the transaction. That way we can avoid a due on sale with the lender your father can claim depreciation and I can setup to get you a tax writeoff on the interest on the property. So say 2-3 years down the road when you qualify you can obtain financing and pay off your dad’s loan and you now have a home with so when you qualify with the lender you can show him you have been making timely payments thus obtaining a better credit rating in the process.
Another benefit is we are asset protecting the property for any legal action from creditors or charging orders.
Another aspect is the land trust takes your dads name off the public record thus shielding ownership which is prudent asset protection.
We would be following federal law in setting up the trust as an arms length transaction.
The main thing is to make sure all parties are protected legally, ethically and of course safely in the transaction.
If you like to discuss further email me at firstname.lastname@example.org and I will schedule a time to speak to you.
Thanks and good luck to you.