Would like to buy my mom's second residence. advice needed

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ttjt_99
Posts: 38
Joined: Sun May 21, 2017 7:49 am

Would like to buy my mom's second residence. advice needed

Post by ttjt_99 » Sun Sep 17, 2017 5:24 pm

Hey everyone,

I couldn't fit everything in the subject line, so I'll do my best to explain my situation below. Approximately 10 years ago, my wife and I went through some financial hardships which ultimately lead to filing for a chapter 7 bankruptcy. We were renting an apartment at the time. As a result, home ownership was out of the foreseeable future.

Enter mom. Instead of my family continuing to pay rent to a landlord during the rebuilding of our credit, she suggested purchasing a home in her name in the town where my wife and I resided, the idea being that she could essentially be our landlord until we got back on our feet. We ultimately decided on a condominium (which I can get in to more detail if need be), due to the affordability since prices for a house in our town were quite high.

In a nutshell, the purchase was made and my wife and I moved in. Even though the mortgage is in my mother's name, I assumed responsibility of making all payments on the mortgage and association fees since day one. (Instead of her having to make payments, and then me reimburse her).
Fast forward 10+ years, and I would like to purchase the condo from her. At the time of purchase, there was a down payment made, but there's still roughly $100k left on the mortage.

I did reach out to a credit union mortgage representative a few months back to explain what we wanted to do, and what he suggested was that I could apply for a mortgage, but said that since it was a family members house, that I should be added to the deed first, after which time I could then apply for the mortgage. All I would need would be to show that I had been making payments on the property.

I guess at this point I'm still seeking advice on how exactly to do that. The credit union lender suggested I go to a deed company or real estate attorney so they could add me. I supposed the reason of being added to the deed would be for tax reasons since I'd be purchasing it from my mother, but I'm not quite sure. I don't know if my mother would need to consult the current lender to make sure there weren't any breaches of the original deed. Could I just be added to the deed and leave it at without actually purchasing?

I suppose a real estate attorney would be best to answer these questions, but I figured I tap the resources of the brilliant people on this forum.
Any and all suggested or advice would be greatly appreciated!

Best,
Trev

123
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Joined: Fri Oct 12, 2012 3:55 pm

Re: Would like to buy my mom's second residence. advice needed

Post by 123 » Sun Sep 17, 2017 5:42 pm

What is the interest rate on the current loan? What would the likely rate be if you did the refinance/purchase? The payments could be significantly different with a new loan.
The closest helping hand is at the end of your own arm.

Topic Author
ttjt_99
Posts: 38
Joined: Sun May 21, 2017 7:49 am

Re: Would like to buy my mom's second residence. advice needed

Post by ttjt_99 » Sun Sep 17, 2017 6:27 pm

123 wrote:
Sun Sep 17, 2017 5:42 pm
What is the interest rate on the current loan? What would the likely rate be if you did the refinance/purchase? The payments could be significantly different with a new loan.
The interest rate on the loan is 4.5%, which I believe falls in line with current rates. The only thing that may impact that is that I have another 2 years before the bankruptcy falls off, though right now my credit rating is around 720, so I don't believe it should have as a big a negative impact anymore.

denovo
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Re: Would like to buy my mom's second residence. advice needed

Post by denovo » Sun Sep 17, 2017 6:36 pm

Has your mom been reporting the income from the home on her taxes and taking the mortgage deduction? Or did you use the mortgage deduction on your own taxes?
"Don't trust everything you read on the Internet"- Abraham Lincoln

Topic Author
ttjt_99
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Joined: Sun May 21, 2017 7:49 am

Re: Would like to buy my mom's second residence. advice needed

Post by ttjt_99 » Sun Sep 17, 2017 6:45 pm

denovo wrote:
Sun Sep 17, 2017 6:36 pm
Has your mom been reporting the income from the home on her taxes and taking the mortgage deduction? Or did you use the mortgage deduction on your own taxes?
My mom claims it on her taxes since the mortgage is in her name. I don't believe I'd be able to technically claim that deduction.

alex_686
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Re: Would like to buy my mom's second residence. advice needed

Post by alex_686 » Sun Sep 17, 2017 6:48 pm

ttjt_99 wrote:
Sun Sep 17, 2017 6:45 pm
denovo wrote:
Sun Sep 17, 2017 6:36 pm
Has your mom been reporting the income from the home on her taxes and taking the mortgage deduction? Or did you use the mortgage deduction on your own taxes?
My mom claims it on her taxes since the mortgage is in her name. I don't believe I'd be able to technically claim that deduction.
Check out the IRS rules. IIRC, the person who makes the payment gets to claim it even if they don't own it.

denovo
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Joined: Sun Oct 13, 2013 1:04 pm

Re: Would like to buy my mom's second residence. advice needed

Post by denovo » Sun Sep 17, 2017 7:46 pm

ttjt_99 wrote:
Sun Sep 17, 2017 6:45 pm
denovo wrote:
Sun Sep 17, 2017 6:36 pm
Has your mom been reporting the income from the home on her taxes and taking the mortgage deduction? Or did you use the mortgage deduction on your own taxes?
My mom claims it on her taxes since the mortgage is in her name. I don't believe I'd be able to technically claim that deduction.

Reason I was asking is I wanted to know what you hoped to accomplish by spending all this money on getting a new loan and so forth. I don't see the benefit of this.
"Don't trust everything you read on the Internet"- Abraham Lincoln

Topic Author
ttjt_99
Posts: 38
Joined: Sun May 21, 2017 7:49 am

Re: Would like to buy my mom's second residence. advice needed

Post by ttjt_99 » Sun Sep 17, 2017 8:37 pm

denovo wrote:
Sun Sep 17, 2017 7:46 pm
ttjt_99 wrote:
Sun Sep 17, 2017 6:45 pm
denovo wrote:
Sun Sep 17, 2017 6:36 pm
Has your mom been reporting the income from the home on her taxes and taking the mortgage deduction? Or did you use the mortgage deduction on your own taxes?
My mom claims it on her taxes since the mortgage is in her name. I don't believe I'd be able to technically claim that deduction.

Reason I was asking is I wanted to know what you hoped to accomplish by spending all this money on getting a new loan and so forth. I don't see the benefit of this.
The primary reason for me to want to purchase the home or get my name on the deed is to avoid any problems that may arise if something were to happen to my mom. Since I'm not on the deed, I'm not sure how I would obtain control . I guess that's the part I need help with answering.

denovo
Posts: 4418
Joined: Sun Oct 13, 2013 1:04 pm

Re: Would like to buy my mom's second residence. advice needed

Post by denovo » Sun Sep 17, 2017 8:40 pm

ttjt_99 wrote:
Sun Sep 17, 2017 8:37 pm
denovo wrote:
Sun Sep 17, 2017 7:46 pm
ttjt_99 wrote:
Sun Sep 17, 2017 6:45 pm
denovo wrote:
Sun Sep 17, 2017 6:36 pm
Has your mom been reporting the income from the home on her taxes and taking the mortgage deduction? Or did you use the mortgage deduction on your own taxes?
My mom claims it on her taxes since the mortgage is in her name. I don't believe I'd be able to technically claim that deduction.

Reason I was asking is I wanted to know what you hoped to accomplish by spending all this money on getting a new loan and so forth. I don't see the benefit of this.
The primary reason for me to want to purchase the home or get my name on the deed is to avoid any problems that may arise if something were to happen to my mom. Since I'm not on the deed, I'm not sure how I would obtain control . I guess that's the part I need help with answering.
In many states, there is something called a transfer on death deed. Think of it like a beneficiary designation on a bank account. She signs it and lists you as a beneficiary and the deed is recorded with the state. When she passes, you provide the county with the deed and a death certificate, and the home is transferred to you. What state are you in?
"Don't trust everything you read on the Internet"- Abraham Lincoln

Topic Author
ttjt_99
Posts: 38
Joined: Sun May 21, 2017 7:49 am

Re: Would like to buy my mom's second residence. advice needed

Post by ttjt_99 » Sun Sep 17, 2017 9:02 pm

denovo wrote:
Sun Sep 17, 2017 8:40 pm
ttjt_99 wrote:
Sun Sep 17, 2017 8:37 pm
denovo wrote:
Sun Sep 17, 2017 7:46 pm
ttjt_99 wrote:
Sun Sep 17, 2017 6:45 pm
denovo wrote:
Sun Sep 17, 2017 6:36 pm
Has your mom been reporting the income from the home on her taxes and taking the mortgage deduction? Or did you use the mortgage deduction on your own taxes?
My mom claims it on her taxes since the mortgage is in her name. I don't believe I'd be able to technically claim that deduction.

Reason I was asking is I wanted to know what you hoped to accomplish by spending all this money on getting a new loan and so forth. I don't see the benefit of this.
The primary reason for me to want to purchase the home or get my name on the deed is to avoid any problems that may arise if something were to happen to my mom. Since I'm not on the deed, I'm not sure how I would obtain control . I guess that's the part I need help with answering.
In many states, there is something called a transfer on death deed. Think of it like a beneficiary designation on a bank account. She signs it and lists you as a beneficiary and the deed is recorded with the state. When she passes, you provide the county with the deed and a death certificate, and the home is transferred to you. What state are you in?
Ah interesting. So that would hold true if the home isn't paid off and there's still a mortgage? Would the death deed be established through the lender currently servicing the loan? I'm in Virginia.

student
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Joined: Fri Apr 03, 2015 6:58 am

Re: Would like to buy my mom's second residence. advice needed

Post by student » Sun Sep 17, 2017 9:48 pm

ttjt_99 wrote:
Sun Sep 17, 2017 9:02 pm
denovo wrote:
Sun Sep 17, 2017 8:40 pm
ttjt_99 wrote:
Sun Sep 17, 2017 8:37 pm
denovo wrote:
Sun Sep 17, 2017 7:46 pm
ttjt_99 wrote:
Sun Sep 17, 2017 6:45 pm


My mom claims it on her taxes since the mortgage is in her name. I don't believe I'd be able to technically claim that deduction.

Reason I was asking is I wanted to know what you hoped to accomplish by spending all this money on getting a new loan and so forth. I don't see the benefit of this.
The primary reason for me to want to purchase the home or get my name on the deed is to avoid any problems that may arise if something were to happen to my mom. Since I'm not on the deed, I'm not sure how I would obtain control . I guess that's the part I need help with answering.
In many states, there is something called a transfer on death deed. Think of it like a beneficiary designation on a bank account. She signs it and lists you as a beneficiary and the deed is recorded with the state. When she passes, you provide the county with the deed and a death certificate, and the home is transferred to you. What state are you in?
Ah interesting. So that would hold true if the home isn't paid off and there's still a mortgage? Would the death deed be established through the lender currently servicing the loan? I'm in Virginia.
You probably have to pay off the balance or obtain another mortgage. https://www.lexisnexis.com/legalnewsroo ... ected=true

denovo
Posts: 4418
Joined: Sun Oct 13, 2013 1:04 pm

Re: Would like to buy my mom's second residence. advice needed

Post by denovo » Sun Sep 17, 2017 9:53 pm

ttjt_99 wrote:
Sun Sep 17, 2017 9:02 pm
denovo wrote:
Sun Sep 17, 2017 8:40 pm
ttjt_99 wrote:
Sun Sep 17, 2017 8:37 pm
denovo wrote:
Sun Sep 17, 2017 7:46 pm
ttjt_99 wrote:
Sun Sep 17, 2017 6:45 pm


My mom claims it on her taxes since the mortgage is in her name. I don't believe I'd be able to technically claim that deduction.

Reason I was asking is I wanted to know what you hoped to accomplish by spending all this money on getting a new loan and so forth. I don't see the benefit of this.
The primary reason for me to want to purchase the home or get my name on the deed is to avoid any problems that may arise if something were to happen to my mom. Since I'm not on the deed, I'm not sure how I would obtain control . I guess that's the part I need help with answering.
In many states, there is something called a transfer on death deed. Think of it like a beneficiary designation on a bank account. She signs it and lists you as a beneficiary and the deed is recorded with the state. When she passes, you provide the county with the deed and a death certificate, and the home is transferred to you. What state are you in?
Ah interesting. So that would hold true if the home isn't paid off and there's still a mortgage? Would the death deed be established through the lender currently servicing the loan? I'm in Virginia.
Virginia has transfer on death deeds. This is between you and your mom and filed with the county. Nothing to do with the lender. You don't have any interest in the property until she passes. It doesn't matter if there's a mortgage on the property when she passes.
Federal law, specifically the Garn-St. Germain Depository Institutions Act of 1982, allows an exception to the due-on-sale clause when a property transfers by inheritance. The law allows a close relative who inherits property to assume payments on the mortgage and retain ownership of the property.
http://info.legalzoom.com/happens-inher ... 23807.html

I guess the only-draw back is your mom could kick you out at any time and sell the place, but I guess you're not worried about that.
"Don't trust everything you read on the Internet"- Abraham Lincoln

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Watty
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Re: Would like to buy my mom's second residence. advice needed

Post by Watty » Sun Sep 17, 2017 10:13 pm

Your mom should get professional tax advice to know what taxes she will need to pay if it is sold or given to you before she decides what to do. In addition to capital gains she might need to recapture depreciation even if she has not been claiming that on her taxes. She also needs to look at her state taxes.

Knowing the tax impact before she does anything is real important so be sure to check on that.

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BolderBoy
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Re: Would like to buy my mom's second residence. advice needed

Post by BolderBoy » Sun Sep 17, 2017 10:25 pm

ttjt_99 wrote:
Sun Sep 17, 2017 9:02 pm
I'm in Virginia.
What county are you in? The counties vary WIDELY in how strict they are about filing the TOD deed with some county clerks literally measuring the margins on the paper and precise placement of text. Others are pretty relaxed about it. Henrico is one of the most niggly about such details (a friend had to redo his TOD filing 3 times because of this). Prince Edward is pretty relaxed.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

Topic Author
ttjt_99
Posts: 38
Joined: Sun May 21, 2017 7:49 am

Re: Would like to buy my mom's second residence. advice needed

Post by ttjt_99 » Mon Sep 18, 2017 7:38 am

denovo wrote:
Sun Sep 17, 2017 9:53 pm
ttjt_99 wrote:
Sun Sep 17, 2017 9:02 pm
denovo wrote:
Sun Sep 17, 2017 8:40 pm
ttjt_99 wrote:
Sun Sep 17, 2017 8:37 pm
denovo wrote:
Sun Sep 17, 2017 7:46 pm



Reason I was asking is I wanted to know what you hoped to accomplish by spending all this money on getting a new loan and so forth. I don't see the benefit of this.
The primary reason for me to want to purchase the home or get my name on the deed is to avoid any problems that may arise if something were to happen to my mom. Since I'm not on the deed, I'm not sure how I would obtain control . I guess that's the part I need help with answering.
In many states, there is something called a transfer on death deed. Think of it like a beneficiary designation on a bank account. She signs it and lists you as a beneficiary and the deed is recorded with the state. When she passes, you provide the county with the deed and a death certificate, and the home is transferred to you. What state are you in?
Ah interesting. So that would hold true if the home isn't paid off and there's still a mortgage? Would the death deed be established through the lender currently servicing the loan? I'm in Virginia.
Virginia has transfer on death deeds. This is between you and your mom and filed with the county. Nothing to do with the lender. You don't have any interest in the property until she passes. It doesn't matter if there's a mortgage on the property when she passes.
Federal law, specifically the Garn-St. Germain Depository Institutions Act of 1982, allows an exception to the due-on-sale clause when a property transfers by inheritance. The law allows a close relative who inherits property to assume payments on the mortgage and retain ownership of the property.
http://info.legalzoom.com/happens-inher ... 23807.html

I guess the only-draw back is your mom could kick you out at any time and sell the place, but I guess you're not worried about that.
Thanks Denovo, that Act answers one of the big "what ifs" I was having. I'm not worried about my mom kicking me out, though you never know what could happen with the onset of dementia :P I wasn't sure if the lender had to be notified of such a deed and was concerned that they'd initiate the clause where the loan would have to be paid in full. Would you consider going through a real estate attorney for such a thing, or deal with the county/state directly? As Watty points out below, I do want to make sure it's done properly because of the tax implications.
BolderBoy wrote:
Sun Sep 17, 2017 10:25 pm
ttjt_99 wrote:
Sun Sep 17, 2017 9:02 pm
I'm in Virginia.
What county are you in? The counties vary WIDELY in how strict they are about filing the TOD deed with some county clerks literally measuring the margins on the paper and precise placement of text. Others are pretty relaxed about it. Henrico is one of the most niggly about such details (a friend had to redo his TOD filing 3 times because of this). Prince Edward is pretty relaxed.
Bolder boy, I'm in Albemarle and don't have a clue how they handle this type of thing, but I'll probably be finding out shortly.
Watty wrote:
Sun Sep 17, 2017 10:13 pm
Your mom should get professional tax advice to know what taxes she will need to pay if it is sold or given to you before she decides what to do. In addition to capital gains she might need to recapture depreciation even if she has not been claiming that on her taxes. She also needs to look at her state taxes.

Knowing the tax impact before she does anything is real important so be sure to check on that.
Watty, great advice thanks. My mom has a friend who's in to real estate as a hobby back where she lives in N.J. so she's going to get a feel for what type of tax implications she may face. It's a little harder for her to keep everything straight with all this stuff so I'm trying to do a lot of the leg work for her.

Great advice everyone I really appreciate it. I think a consultation with a real estate attorney and my mom's tax accountant/financial adviser would be first on our list of things to do now.

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