Wednesday, July 25, 2012

Get Legal Assistance Before You Offer to Pay Someone Else’s Mortgage

[Published July 26, 2012, in the Denver Post and in four Jeffco weeklies]

Last week I touched on the subject of real estate scams, prompting one reader to tell me what had happened to her.  A fellow church member had made a deal with her: “You can live in my house if you help me pay the mortgage. Later you can buy it.”

So this reader did just that, moving into the person’s house and providing the money to cover the mortgage payments.  The only problem was that the fellow church member pocketed the money and didn’t pay the mortgage. Now the bank is about to foreclose on the home and evict her.

Are you paying someone else’s mortgage under such an agreement?  If so, there’s a better way to do it.  One of my previous columns, published on June 9, 2011, was about such arrangements and included a link with advice from a lawyer on how to do it so that both parties are properly protected.  You can find that article and that link at http://www.JimSmithColumns.com.

“Wraps,” as such arrangements are called, can, when done properly, be a win/win for the seller who can’t sell (because he’d have to bring money to the table) and the buyer who can’t get a mortgage (because of a low credit score).  With proper legal agreements in place, the seller can move on without incurring a hit on his credit due to a short sale or foreclosure, and the buyer can have a house to live in while he works on improving his credit enough to get a mortgage.  Read that article and that link and call me if you have questions.

The key is that legal documents have to be drawn up. It may sound expensive because lawyers are involved, but the fee to the lawyers (I was given a quote of $1,500) is likely less than the points and fees you’d incur to get a mortgage.

If you are a seller who can’t sell or a buyer who can’t buy, call me and I’ll put the two of you together

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