Saving my Mother in Law Can this be done)

[cadstar]

My mother in law is behind on her mortgage, she is an unemployed widow receiving SSI. Her credit is toast, and basically can not afford her mortgage. 

Add to that, the home is worth considerably less than she owes on it.

I would like to buy her home, (and she will become a renter) but not for what she owes the bank seeing as how it isnt worth that much. My credit is good, and I have no problems qualifying for a home loan.

My questions are as follows:

1.Can she short sell the house to me.

2. Since this is not an arms length transaction.. is this legal.. or do they see it as trying to circumvent the system?

3. What would you recommend that I do?

Thanks in advance guys

[ji9]

How attached is she to the house?  Might be easier for everyone if she just let the house go and for you to buy her a different house if you are willing.  Good luck!   

[cadstar]

Thanks for the reply,

She is super attached to the house...husband died in the house..first house they bought when they emigrated. etc..etc.. I would prefer to buy a different house, the fact is.. she owes 105k on the house.. she is paying 8.05% because her credit is shot she cant refi. Homes in that are are listed and selling at 45k 50k, (its not in the greatest neighborhood, but its home to her) 

[IOBA]

1.Can she short sell the house to me.

She would need to go to her mortgage company and ask for permission to short sell it.   They will usually agree to it if she is behind on payments.   Who is the lender?

2. Since this is not an arms length transaction.. is this legal.. or do they see it as trying to circumvent the system?

The best way to do this MIGHT be for her to list the house with a realtor, you make an offer, and go from there.   Is there any way that the bank or the realtor would know you are related?   The realtor can do a market analysis to figure out what a fair asking price is for the property.   The "neutral third party" that is involved in short sales is the title company.   For some reason, it's suppose to be a big secret.  *eye roll*   So if the bank says yes to a short sale, you need to find a title company that has a lot of experience with short sales and working with that lender.   The lender may dictate which title company to use.

3. What would you recommend that I do?

Tough question to answer.   If you are getting a mortgage on the property, you would probably need to say it's going to be your primary residence OR be prepared to put at least 20% down.   The bank (who ever has the mortgage) is not going to like short selling it to be a rental.

A cheaper alternative may be for her to file BK.   

The fairest solution (in my opinion) is for her to stick it out and continue paying the mortgage if she can afford to.

How old is she?   Anything that would cause her to need to move in the near future?   Can you do maintenance on the home for her?

[StartingOver10]

I don't want to scare you  but, you can not buy the house.  It is not an arms length transaction if you are buying the house from a relative. You have to sign an affidavit that it is an arms length transaction and the closing paperwork has other documentation you would have to sign. The banks check each of the parties in a short sale (buyer and seller and agents).  This is considered fraud if you say its an arms length transaction and its not. There are severe consequences for mortgage fraud. 

The sellers' lender CAN NOT dictate who the closing agent/title company is going to be on a short sale. The bank can only dictate the title company on a property they own. The bank does not own the property until the foreclosure sale is complete and the redemption period (if any) is over.

If your Mother In Law can not afford her mortgage any longer and she has tried HAFA, then she should seriously consider a short sale. If she decides to do a short sale, then she should hire an an experienced short sale agent to handle the it. The paperwork for the short sale request is sent in along with the appropriate forms (each lender has their own) and with all the documentation the bank requests including the purchase contract.

I know your intentions were good about trying to help your Mother In Law. The entire idea behind arm's length transactions is to prevent exactly what you are proposing.

I have sold many, many short sales (I'm a Realtor). There are very specific regulations in place now to govern the process. Remember, the bank is not your friend. You need an agent that will be an advocate for your Mother In Law so she can help her with all of her options. You may want to buy another home for your Mother In Law, that is perfectly ok. Just not the one she is currently in.

[Booner72]

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@StartingOver10 wrote:

I don't want to scare you  but, you can not buy the house.  It is not an arms length transaction if you are buying the house from a relative. You have to sign an affidavit that it is an arms length transaction and the closing paperwork has other documentation you would have to sign. The banks check each of the parties in a short sale (buyer and seller and agents).  This is considered fraud if you say its an arms length transaction and its not. There are severe consequences for mortgage fraud. 

The sellers' lender CAN NOT dictate who the closing agent/title company is going to be on a short sale. The bank can only dictate the title company on a property they own. The bank does not own the property until the foreclosure sale is complete and the redemption period (if any) is over.

If your Mother In Law can not afford her mortgage any longer and she has tried HAFA, then she should seriously consider a short sale. If she decides to do a short sale, then she should hire an an experienced short sale agent to handle the it. The paperwork for the short sale request is sent in along with the appropriate forms (each lender has their own) and with all the documentation the bank requests including the purchase contract.

I know your intentions were good about trying to help your Mother In Law. The entire idea behind arm's length transactions is to prevent exactly what you are proposing.

I have sold many, many short sales (I'm a Realtor). There are very specific regulations in place now to govern the process. Remember, the bank is not your friend. You need an agent that will be an advocate for your Mother In Law so she can help her with all of her options. You may want to buy another home for your Mother In Law, that is perfectly ok. Just not the one she is currently in.

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+1 bc you are wanting a short sale.  I talked to my old realtor about this and he said that the banks are out to get people trying to save their relatives via short sales.  Don't do it.

Now if you wanted to pay what she owed, and get a conventional loan, u just might very well be able to do it.

[cadstar]

I appreciate all the thoughts. Im not a realtor, but I didnt just fall off the turnip truck either.. my gut feeling was that the short sale venue was not viable, or else everyone would be doing it.

I may just contact the bank directly with her, and make them an offer thats fair, and they can take it or leave it. Im not going to take over a 100K mortgage on a home that is at best worth 50K in its current state and in a seedy neighborhood. Im never going to live there, I just feel bad for my MIL and this was an attempt to be a nice son in law.

BTW.. the paper is held with GMAC..

Anyone got any contacts over at GMAC??

[Booner72]

I hope you don't think we were talking down to you and that we think you did fall off the turnip truck 

Have you thought about helping her pay 1/2 her payment or something?

[cadstar]

No offense taken.. 

Ive been helping pay half..and then some.. my rationale was that "If im gonna carry this thing I may as well own it and have the asset, one day when she passes maybe I an sell it or turn it into a crack house (just kidding a whore house would bring in more).. 

[ji9]

Really too bad she is attached to the house as it sounds like the best thing would be for her to just let it go and file BK.   She should consider how it would make her late husband feel to know what she was going through and maybe in respect for him (instead of the house) the best thing she could do would be to let it go.  I'm sure he would not want to see her in this situation when she obviously doesn't need to be.