Family Transaction of Real estate
There are homeowners in trouble and that are desperately trying to get someone to buy their property, anyone including family and friends. These types of transactions are different than a regular mortgage transaction. Traditionally an arm’s length transaction is the standard for real estate contracts, meaning both parties are independent and are looking out for each other’s own best interest. However, in some cases there are sellers that are wanting to conduct the sale of real estate with close family members or relatives often out of desperation. They are not sure if their mortgage company will go for this business transaction. So homeowner may have wondered if this is possible? We will look at this matter.
Correct answer to the previous question is it depends on the lender. Many lenders are allowing this type of transaction between family members or friend, but you will have to check with your own lender to see if they allow that or not. Mortgage companies usually frown upon these types of transactions, but see them necessary in some cases to avoid foreclosure. They do not want to do these types of transaction as their 1st choice, but if they will end up with a new buyer wanting to pay off the loan, then they may take that offer and get back some or all of their investment. The new buyer will have to qualify for a mortgage the traditional way, through a mortgage company or bank in order to get the loan and pay off the old sellers loan, and assume the new payments. With these types of transaction the lender stands a chance of loosing more money. For example, in a regular arm’s length transaction; the seller is looking for the highest price for their property, and the buyer wants the lowest price, which creates a fair market price that could benefit the lender by getting more from the transaction that may pay off the entire loan. Now in a transaction where relatives are selling to each other, the seller will often discount the prices as much as allowable to their relative, who is the buyer. The lender can come out getting a much lower selling price in the case of a short sale of the real estate to avoid foreclosure.
If you are selling a property it is best to look for a buyer that is not related to you, or someone you do not know; like a stranger. It is more likely to be approved by your lender in the case of a short sale of the property, than would selling to a family member or friends be. Again, your lender may do it unwillingly to try to collect back on their investment. They are plenty of ways to attract outside buyers without the help of a realtor. Do your research and find some of those other ways to sell 1st. If you are running out of options you should then consider selling to a willing family member as a last ditch effort .
