Non arms length transaction (buying from family member)

[sd92128]

Hi,

I m looking at buying my parents home, how should I go about with this transaction?

My parents still has a small loan, what problems will I face when I try to get a loan?

I hear lenders shy away from non arms length transaction.

Can someone refer me a lender who does this type of loan?

[briansd1]

Should not make any difference to the lender as long as appraisal comes in. Any lender will do.

Just hire an escrow/title company to handle the work, just like you would in a traditional transaction.

[SD Realtor]

The presumption is that you will go through the normal means of procurring your loan. That is, you cannot just assume the loan your parents have. From a financing angle, this will not be any different then if you bought the home from a non family member. You will need to qualify for financing on your own, and you will need to come up with the downpayment. The escrow will commence and once your lender funds the loan, those proceeds will go to pay off your parents loan and the balance will go to your parents.

If your parents decide to give you a break on the price and sell you the home lower then market value that should even be okay as long as they appraise. However, the tax assessor will base your property tax on fair market value. You will also need to make sure that you purchase the correct amount of homeowners insurance should you get the home below market value.

[UCGal]

I bought from my dad, after my mom passed. He wanted to downsize, we wanted a home in a neighborhood with good schools. It was a win-win.

We hired an escrow/title company and got a regular purchase mortgage. My dad had paid off the house- but if he’d still had a mortgage, that would have been handled at closing like any other home resale closing.

If your parents have owned the house for a while AND are not rolling their lower tax rate into a downsized home, you can continue their lower, Prop 13, tax rate.

But it’s an either/or situation. My dad was downsizing, and wanted to take his tax rate with him as an over 55 year old. But we wanted to keep the tax rate on the home we were buying from him.

Look up prop 13, prop 58, prop 193, prop 60 and prop 90.
http://www.boe.ca.gov/proptaxes/faqs/caproptaxprop.htm#heading

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