Home Buying in Cambridge>Question Details

cambridgeborn, Home Buyer in Cambridge, MA

Buying half of a co-owned two family home...does this effect loan and tax benefit eligibility for first-time home buyers?

Asked by cambridgeborn, Cambridge, MA Sun Nov 20, 2011

My parents have co-owned a two family house in Cambridge for the last thirty years. The other owners are planning to sell their share and my wife and I, who are first-time home buyers, are interested in buying out their half of the house. Are we eligible for the same mortgage programs and tax benefits for first time home buyers if we are buying into a house that is already fully paid off? Are there benefits to condoizing the units before we buy into the house? Who are the best experts to answer these questions: real estate professionals? Lawyers?

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4
Rona,

They are not buying their parents position but that of the co-owner,.

You certainly can buy any interest in a property you want without converting to a condominium.

As to the lender providing them a mortgage, that too is done everyday with two different owners in muli unit or single family properties,

In this case It would take signitures of both the new owners and that of the existing owners ( the parent in this situation) on the mortgage.
1 vote Thank Flag Link Sun Nov 20, 2011
Cambridge born, Do your folks live in the property? If they do I or have lived in it 2 out of the past 5 years, I suggest you buy your folks half, they can take upto the 500k capital gain exemption and again take the gain again when they sell the new unit they buy from the other owner. if they do not live in it, then it will not make a difference.

You would be eligible for all the same programs and tax benefits based on your acquisition cost if you live in the property, if you do not live in it, you will not get the benefits of a 1st time home buyer as it will be an investment, but you will be able to depreciate the property and the operating expenses which will help you on your personal taxes.

Two best people to speak with, 1st your parents accountant, 2nd a good real estate attorney, I have a couple to recommend if you need one. Lastly I also have a mortgage expert at Cambridge Savings Bank
Web Reference: http://www.LouisWolfson.net
1 vote Thank Flag Link Sun Nov 20, 2011
Laywers are the best answerers for this one. You will need to understand the deed and not only how the parties hold the property (Tenants in Common, Joint Tenants, party wall, whole building, 1/2 of the building, etc.) If it is only an interest in the property, that is one kind of transfer. If they actually own 1/2 the building with some sort of shared/party wall agreement, that is another type of transaction. A lender will usually only lend f they can foreclose on something specific. A percentage of a whole building is different than owning specifically a designated 1/2 of a building. Find a good real estate lawyer, preferably one who has done a transaction like this one before.
0 votes Thank Flag Link Mon Nov 21, 2011
I suspect that an attorney will say you need to convert to condos to create something the other owners can sell. You can’t buy out their share, with purchase mortgage money, and have your parent retain mortgage-free ownership of the other part of the same house, unless the house is legally divided as condos.
You need to check with a lender, or two, about buying a condo in a two-family house. Conforming loan requirements are very strict about condos in small associations. Make sure you qualify to buy this condo before going through the expense of conversion. Lenders want large down payments (20 or 25 percent) and they take a serious look at the condo documents and budgets.
My advice is to check out your lending. If all is well there, convert to condos and buy the other part of your parent’s jointly owned two-family house.
0 votes Thank Flag Link Sun Nov 20, 2011
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