sell my house to my parents

Asked by Amy, Queen Creek, AZ Sat May 3, 2008

We live in Queen Creek AZ where the real estate market fell hard. We owe $270,000 for a house that sells down the street for $125,000. Thanks to the airline industry my husband's job is questionable to say the least. We are looking into shortselling our home to my parents for around $125.00 (with banks ok) and buying it back as soon as we qualify, any tips!!!

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The Urban Te…, Agent, Phoenix, AZ
Mon May 5, 2008
YIKES. Listen to Jay and Don. Talk to an attorney. I'd be shocked if anyone would advise you to pursue this option.
Web Reference:  http://www.urbanteamaz.com
0 votes
Don Tepper, Agent, Burke, VA
Sun May 4, 2008
Don't do it. I'm not a lawyer, so this isn't legal advice. However:

What you're describing could well be interpreted by the lender as fraud. First, you haven't described a hardship. If your husband lost his job AND you then were unable to make payments, that could be a hardship. But there's no hardship yet. So, to persuade the lender that you're facing a hardship, you'd have to, um, not tell them the truth.

But then it really gets bad. You sell to your parents. You'd be pulling them into your scheme. As Jay says, that wouldn't be an "arm's length transaction." But let's say, for sake of argument, that $125,000 is what the property really, truly is worth today. OK. And somehow your parents do buy it.

Later they sell it back to you for $125,000. Let's look at that transaction. You and your parents have just stiffed the lender for $145,000. Your parents have helped you erase $145,000 in debt that you legitimately owed for the purchase of the property.

You might be waiting a while in order to buy your house back. Short sales have a serious impact on credit ratings. And that would affect your ability to obtain credit anywhere--such as buying a new car. And it'll also send your interest rates on credit cards soaring.

Meanwhile--and again, I'm not a lawyer--your parents might find themselves faced with the prospect of spending a few of their golden years as guests of the local constabulary.

My very strong (non-legal) advice: Don't do it.
0 votes
Pam Winterba…, Agent, Danville, VA
Sat May 3, 2008
Amy.....

In order to have a shortsale you must have to prove you have a hardship. If the market has declined and you still currently have your job and able to make the payments you may not qualify for a hardship. You may want to check with your tax person.
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