Home Buying in 95376>Question Details

Raquel, Home Buyer in Tracy, CA

I'm looking into buying my parent's house. Are there reprucusions?

Asked by Raquel, Tracy, CA Fri Sep 23, 2011

My mother lost her job and my father's industry is not going well. If things keep going the way they have, they might not be able to pay their current mortgage and they owe more than what the house is worth. They credit is not very good to refinance. How would I begin a process to buy the house? And are there any possible future problems with me doing this?

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I know the question is old, but others may currently be in a similar situation.
problem if you buy?? not if you buy it for market value. but according to what you stated the mortgage is greater than what the home is worth. so unless the bank will approve a short sale, the full amount owed will need to be paid. However, you cannot buy the home as a short sale.

if you buy the home, do you plan on occupying a portion of the home with your parents???

if the amount owed is greatly more than the home's worth, sometimes foreclosure may be best.

options: shot sale, foreclosure, pay down the principal then buy the home if the amount owed is only slightly above the home's value, assist your parents with the mortgage payment, rent out the home if it will cover the mortgage payment and buy a home for you and your parents.

good luck
0 votes Thank Flag Link Sun Nov 10, 2013
@Raquel, If you qualify to buy a home for them, then I would just buy another house for them and rent it out to them, that will help them and it will be good for your future, but this house I would let it go or just surrender title, foreclosure, or maybe the bank will modify the loan because I have heard that in a Short Sale, the seller might be reliable for Taxes on the difference but I'm not an expert in that area, I would talk to my accountant.

If you want to find that new home, give me a call I would help you

Coldwell Banker

Tim 925-200-0233
0 votes Thank Flag Link Sun Nov 10, 2013
Hi ,
I am an agent in the Tracy Area and there are a couple of things that should be considered when attempting to assist your paarents.
1. Short Sales Must be arms legnth transactions- Which means that no family members can be the purchaser.
2. Are you financially ready, and credit wise, ARE YOU READY?
If the answer to question 2 is yes.Then maybe consider purchasing a similar home in the area. You will get the home for an amount similar to what you would have paid for your parents home. Maybe you can get a few upgrades in the process, that your parents don't currently have. Like Granite Counter tops, Tile flooring, ....etc.
I know it is not the same as keeping the family home, but maybe the bright side is, your parents can upgrade.
Please feel free to contact me if you have any questions about finding a suitable replacement in Tracy, I would love to help. You can click on my profile for contact details. Otherwise Good Luck, I hope it works out. Your parents are very lucky to have a daughter like you Raquel.
0 votes Thank Flag Link Tue Sep 27, 2011
Personally, I think that trying to help your folks out of an underwater mortgage is a very noble and loving gesture. However it's tantamount to swimming upstream and will lead to the law of diminishing returns. In the end you all lose.

What might be a more practical solution is to help them navigate through a successful short sale. Concurrently you could begin looking for a viable RE investment that will be beneficial to all concerned. Don't paint yourself into the same corner they're in.

There's so many clean and fresh RE deals out there today. Why continue beating a dead horse?
0 votes Thank Flag Link Sun Sep 25, 2011
Raquel, since you seem to be a helpful person, nothing is stopping you from contributing money to help them with their payments during this rough patch of their life. They also may want to look into a loan modification to potentially reduce their payments (therefore helping you reduce the amount you need to contribute for things to work out for them). I hope your parents are able to get back on their feet without too much trouble.
0 votes Thank Flag Link Fri Sep 23, 2011
Raquel, First, there is no way for you to buy the property as a short sale; therefore, you would have to bring the difference over the appraised value, minus down payment, to the closing table. For example, house is worth 150K, but value is 100K. FHA loan would require 3.5% (3,500) down payment for a loan amount of 96,500. Your cash to close (plus closing costs) would be 53,500 (down payment and underage of loan payoff). Also, the fact remains that unless you are going to live in the property you are really going to need to put 25% to 30% down...reality check: 25K down payment, plus 50K underage, plus closing costs. If your parents credit is not "horrible" you might consider doing a FHA refinance with you on the loan as a non-occupant co-buyer in lieu of buying the property outright. You would still have to reduce the underage for qualification purposes.

Given the current market it is difficult to encourage someone to put that kind of capital into an asset that is likely not going to be profitable for quite some time. However, I recognize there may be emotional and/or other reasons why you and your parents want to keep the current property. There are ways to do it; however, it would be fairly challenging.

Additonally, if you already own a home you are going to have to qualify for both mortgages. I believe you really need to talk with a mortgage professional to deem if 1). anything is possible and 2). if you reallly want to make the financial commitment. Your goals are extremely noteworthy; however, it may make more sense to start looking at other options.
0 votes Thank Flag Link Fri Sep 23, 2011
Hello,


The condition for short sale is that it should be an arm's length transaction which means relatives or direct family memebers are precluded from purchasing the house.

Based on your parent's home appraised value and the amount of reinstatement , you could evaluate if keeping the house is feasible. If they are curreent on their mortgage payments and no previous bankruptcy history, FHA has some program that allows borrowers to purchase a new home after short sale. Please contact loan officer who knows about FHA programs.

Lastly, you might advise your parents to do short sale and purchase under your name a different house for them. As you know prices have been at 2004 level and there are many inventories that you could afford.

Good Luck and stand strong !

Daniel Choi
Nextage Capital Advisors
(213) 820-7509
http://www.michantli.com
http://foreclosuremission.blogspot.com
http://eviteforeclosures.blogspot.com
0 votes Thank Flag Link Fri Sep 23, 2011
Well, if they owe more than it is worth you would not be able to buy the home as a short sale while they remain in the home because it is not an "arms length" transaction. You could see if their current lender will let you assume the loan and take title, or you could pay down the balance of the mortgage over the current value and then refinance the loan or purchase the home and pay off the paid-down loan. If you would like some data for comparable sales in the area to help determine the value of the property please give me a call or send me an email. Good luck!
Web Reference: http://www.LaceyFisher.com
0 votes Thank Flag Link Fri Sep 23, 2011
Hi Raquel,

I would contact the lender to find out what full payoff would be and then contact a Realtor like myself or appraiser to get a handle on market value. At that point you'll have enough information to make a few decisions. If they owe more than the home is worth, in order to obtain financing you'll have to come up with the difference. Lenders typically will not loan you more than the homes appraised value. The other option would be to short sale the home. Of coarse finding a suitable home for your parents to live is of prime importance. You could look into purchasing another home for them, while your parents Short Sale their home, so they have a smooth transition.

I hope this information helps you.

Rocky

Rocky G.H. Hawrysz
Prudential California Realty
(209) 444-6610 – Direct | Rocky@PruCalifornia.com | http://www.TeamHawrysz.com | License No. 01468373
0 votes Thank Flag Link Fri Sep 23, 2011
Not really, in fact if you are buying it for them to stay in it there are some really cool loan programs out there that would work great for you. From your notes it looks like it would be a short sale if that is the case it needs to be 'arms length' transactions which mean a relative cannot buy. Give me a call if you want to go over the details a little more in depth. Good Luck
0 votes Thank Flag Link Fri Sep 23, 2011
I would start by having an appraisal done and deciding with your parents on a price. If you'll need a mortgage, contact a reputable lender to find out if you'll qualify, and at what rate. If you want to move forward, I would speak with a real estate attorney in your area. Good luck
Web Reference: http://www.FineHousePA.com
0 votes Thank Flag Link Fri Sep 23, 2011
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