Buying house from parents

[yoshald]

I want to buy a house my parents are selling. We negotiated a price based on my cousin the realtor's estimate, less her realtor fees. I moved in already and I have been paying a monthly payment that will be applied to the purchase price. We haven't done any paperwork yet. I've never bought real estate before. I'm not an idiot, but I'm pretty ignorant in these matters, so thank you for any advice.

From the little googling I've done, I should not do a quitclaim deed, as the tax implications are negative. My folks suggested doing a contract for deed. They have a trusted family lawyer we can consult.

What else is relevant? I'm single in my 40's and self-employed for decades. They are pushing 70, and currently healthy. There are siblings that would get anything willed equally from our parents. All are lower middle class. Should I consider a bank mortgage? My Fico score is around 780. I understand it could be higher if I had a mortgage history.

[cheese_breath]

Is the trusted family lawyer a real estate lawyer?

How will you pay for the house if you don't get a mortgage?

[jfn111]

I'm not understanding what your doing? A quitclaim deed transfers their ownership immediately to you. A contract for deed protects them if you don't pay.
It would be simpler to get a mortgage and buy them out, unless they don't need the money and would prefer monthly payments.

[WS1]

Seller financing

You own the house right now
Your parents are the mortgage lender (mortgagee)
They die before you payoff the note, I guess you come out ahead??

[Watty]

What else is relevant?

You should have the house inspected just like if you were buying it from a stranger. This will make things a lot less awkward if there is some $20K repair a few months after you buy it. There could be problems that neither you or your parents know about.

Should I consider a bank mortgage?

You should get a mortgage, they are at historic lows so they are a great deal right now.

One problem with your parents taking a note that five years from now interests rate could be a lot higher and it might not feel fair to your parents if you are still paying 3% when they really need the money.

Another big problem is that you could run into unexpected setbacks and not be able to pay the mortgage then things would be more than awkward between you and your parents and even your siblings. If you are dealing with a bank that would be a lot cleaner.

Buying a house from them has lots of possible pitfalls, having them finance it would drag that out for years and be an order of magnitude more risky to your relationship. If the note is not paid off by the time they die then your siblings could end up being partial owners of the note and that could also be awkward.

If you cannot qualify for a good mortgage on your own then you should not be buying the house.

[Sandtrap]

I want to buy a house my parents are selling. We negotiated a price based on my cousin the realtor's estimate, less her realtor fees. I moved in already and I have been paying a monthly payment that will be applied to the purchase price. We haven't done any paperwork yet. I've never bought real estate before. I'm not an idiot, but I'm pretty ignorant in these matters, so thank you for any advice.

From the little googling I've done, I should not do a quitclaim deed, as the tax implications are negative. My folks suggested doing a contract for deed. They have a trusted family lawyer we can consult.

What else is relevant? I'm single in my 40's and self-employed for decades. They are pushing 70, and currently healthy. There are siblings that would get anything willed equally from our parents. All are lower middle class. Should I consider a bank mortgage? My Fico score is around 780. I understand it could be higher if I had a mortgage history.

You can have a title company do everything for a small fee. They will make sure everything is done right.
Yes. Mortgage. Shop around everywhere. There are deals out there.

It's not always a wise thing to use "cousin" realtor, "trusted family" lawyer, etc.

Hire your own real estate attorney for a small fee. You really need to look out for yourself and not family and family connections looking after you. Do things straight up. Do not have your parents carry the loan. Not even a little. Not even if they insist.

j

[merdahl]

Your Cousin, the realtor, the one who collected the commission, should be guiding you thru this.

[TropikThunder]

Your Cousin, the realtor, the one who collected the commission, should be guiding you thru this.

Otherwise what was the commission for ....

[makingmistakes]

Your Cousin, the realtor, the one who collected the commission, should be guiding you thru this.

Otherwise what was the commission for ....

I thought the OP meant the price he is buying it for was the cousin realtor’s estimate minus what her commission would have been if sold to a non-family member.

[Gill]

Your Cousin, the realtor, the one who collected the commission, should be guiding you thru this.

Otherwise what was the commission for ....

I thought the OP meant the price he is buying it for was the cousin realtor’s estimate minus what her commission would have been if sold to a non-family member.

That’s the way I understood it also.
Gill

[PaunchyPirate]

I bought my parents house about 5 years ago. Not for me to live in, but to get them some cash to ease their debt burden. We had it appraised by a local appraisal company to determine the fair price. I didn’t want my siblings to think I was buying at a discount that impacted any future inheritance they might get. I paid them full price when I could have probably deducted what they would have had to pay an agent had they sold on the open market. But they needed the money more than I did. Also, by selling it at a documented fair market value, we protected them from any future Medicaid clawback that might occur otherwise.

I paid cash so the mortgage aspect didn’t apply. I did not get an inspection since I knew the house. We used the attorney that we all used for setting up our wills and other estate planning docs. They did all the paperwork required in our county. The attorney charged maybe $650 and the appraisal was $350 I think.

And the deal was that they can still live there as long as they need/want rent free. I pay property taxes and they pay for everything else they would have paid for if they still owned it.

[Gill]

I’d suggest a normal purchase with you paying in full and obtaining a warranty deed from your parents.
Gill

[Bobby206]

I’d suggest a normal purchase with you paying in full and obtaining a warranty deed from your parents.
Gill

I agree.

Right now 30 year fixed rate mortgages are UNDER 3%. To me that's a no brainer!

[yoshald]

Your Cousin, the realtor, the one who collected the commission, should be guiding you thru this.

Otherwise what was the commission for ....

I thought the OP meant the price he is buying it for was the cousin realtor’s estimate minus what her commission would have been if sold to a non-family member.

That's right. Minus what the commission would have been. My parents would get the same proceeds from the sale whether I buy or a stranger. They would avoid a realtor fee.

[yoshald]

I’d suggest a normal purchase with you paying in full and obtaining a warranty deed from your parents.
Gill

Paying in full? I'd have enough in my IRAs to buy it outright, but that's probably not the way to go. That would deplete my retirement savings and I'd have to start over. About 50% of my retirement is in Roth IRA, and 50% in traditional IRA. I do have 20% cash for a down payment.

[yoshald]

You can have a title company do everything for a small fee. They will make sure everything is done right.
Yes. Mortgage. Shop around everywhere. There are deals out there.

It's not always a wise thing to use "cousin" realtor, "trusted family" lawyer, etc.

Hire your own real estate attorney for a small fee. You really need to look out for yourself and not family and family connections looking after you. Do things straight up. Do not have your parents carry the loan. Not even a little. Not even if they insist.

j

Someone else recommended just using a title company. I should not need a realtor, right? I admit, I don't know what they do besides help you shop for a house which I don't need. If I get a traditional bank mortgage, I should not need a real estate attorney either, right?

[is1971]

Someone else recommended just using a title company. I should not need a realtor, right? I admit, I don't know what they do besides help you shop for a house which I don't need. If I get a traditional bank mortgage, I should not need a real estate attorney either, right?

Yes, you definitely do NOT want to involve a realtor. Just call a couple of title companies and explain the situation to them and see what they'll charge you to handle the escrow / transaction. Generally speaking, you shouldn't need a real estate attorney either, though there are a few states that require representation at closing. The title company you choose should be willing to help you with the process.

[flaccidsteele]

Seller financing

You own the house right now
Your parents are the mortgage lender (mortgagee)
They die before you payoff the note, I guess you come out ahead??

+1 this

[yoshald]

Seller financing

You own the house right now
Your parents are the mortgage lender (mortgagee)
They die before you payoff the note, I guess you come out ahead??

"Seller financing" = You are advocating title for deed? If I go this route I would need to make things fair for my siblings where I would continue to pay them their share basically. This would be what the real estate lawyer would work out.

"You own the house right now"
Are you asking me? Or...I'm not sure what you are stating.

[WealthConstructor]

What are the capital gains and property tax implications resulting from this sale?

[Sandtrap]

You can have a title company do everything for a small fee. They will make sure everything is done right.
Yes. Mortgage. Shop around everywhere. There are deals out there.

It's not always a wise thing to use "cousin" realtor, "trusted family" lawyer, etc.

Hire your own real estate attorney for a small fee. You really need to look out for yourself and not family and family connections looking after you. Do things straight up. Do not have your parents carry the loan. Not even a little. Not even if they insist.

j

Someone else recommended just using a title company. I should not need a realtor, right? I admit, I don't know what they do besides help you shop for a house which I don't need. If I get a traditional bank mortgage, I should not need a real estate attorney either, right?

A title company is all you need. A good title company will do everything, from escrow to title searches to transfers to. . . . etc.
No. You don't need a realtor, or an attorney. The sale and the price has already been agreed upon. Both parties already know and "trust" each other. A good title company will be sure there are no liens, etc, on the property.

Your own real estate attorney is "your" advocate. He/she will make sure you are not getting cheated or putting yourself in a disadvantaged position as well as limiting your liabilities as much as possible. Where many others might be looking either to make the "deal happen" or help everyone come to an agreement, "your own" real estate looks out for your interests "first". And, makes sure you are not in a compromised position in the future, "what if's".
Especially in family business transactions, everyone is often on thier best behavior and trying to be "nice". A real estate looks at the situation and implications going forward and in the future, if things become "not nice", which is human nature.

j

[Jack FFR1846]

A title company is all you need.

I believe this is a Western US thing. In my neck of the woods, there's no such thing as a title company. If you're doing it yourself, you still want a title search and for all the correct documents to transfer and register the transaction and deed with the county. We went with our attorney to the county courthouse when buying our first house and watched as he went through all previous deeds back to King George. We used the bank's attorney, so the fee was low. He did the closing with us. No real estate agent was involved. What an agent would do (literally) is show up at the closing, get their commission check and then leave while the closing proceeds. When selling that first house, we used an agent and the same bank's lawyer and that's exactly what the agent did.

[Sandtrap]

A title company is all you need.

I believe this is a Western US thing. In my neck of the woods, there's no such thing as a title company. If you're doing it yourself, you still want a title search and for all the correct documents to transfer and register the transaction and deed with the county. We went with our attorney to the county courthouse when buying our first house and watched as he went through all previous deeds back to King George. We used the bank's attorney, so the fee was low. He did the closing with us. No real estate agent was involved. What an agent would do (literally) is show up at the closing, get their commission check and then leave while the closing proceeds. When selling that first house, we used an agent and the same bank's lawyer and that's exactly what the agent did.

Different names in different areas.
A “do everything company”: title, escrow, sales docs, etc, etc. = (insert name).

j

[WS1]

Seller financing

You own the house right now
Your parents are the mortgage lender (mortgagee)
They die before you payoff the note, I guess you come out ahead??

"Seller financing" = You are advocating title for deed? If I go this route I would need to make things fair for my siblings where I would continue to pay them their share basically. This would be what the real estate lawyer would work out.

"You own the house right now"
Are you asking me? Or...I'm not sure what you are stating.

Sorry for the delay.
I was describing the end result of my suggestion. Your parents would sell the house to you right now at full market value, you’d have full ownership but send the monthly check to mom and dad instead of Wells Fargo.

Your siblings could receive their shares every month via your parents or wait to get their portion as part of your parents estate, but I’m sure many on this site who have been in similar situations will advocate for an immediate transaction with 3rd party financing and paying everyone out in a lump some to avoid family conflicts.

I’ve never done any of the above. It’s just one more topic I have no business knowing about or offering advice for.