I am selling a house on a rent to own basis you might say?

Question

I owe 15 years on this house that I am tired of renting and need to sell it rather quickly. I have a lifelong friend who I trust very much and have agreed to sell him the house on monthly payments until he can get his credit cleaned up or a co-signer. Without going into a long story, his credit is in a mess because of his recent divorce from an ex-wife who ran up thousands of dollars of credit card bills, and other things shortly before she left him for another man. Anyway, I know I will get my money and I know he will eventually get all this cleared up, my question is... I want to protect myself and him by making up some kind of contract that we can each sign and have notorized. What kind of information do I need to include in this? I want a fair contract that protects the BOTH of us. Please offer suggestions. Oh and please, no answers involving NOT selling the house in this manner. I am going to do this, I just need to know how to draw this up. Thank you.

Answer 1

Since you are set on selling this property to your friend, and you want to protect yourself and your friend.

You should draw up a contract with the complete sales price, If there will be a down payment, you will want this to be in the contract.

Once you have determined the sales price, subtract the amount you currently owe on your mortgage as well as any down payment paid you. This will be the mortgage amount you will carry.

How much interest rate you plan to charge your friend. When you expect this contract to end, normally anywhere from 3-5 years. You can amortize your note for 30 years all due and payable in 3-5 years or whatever you decide, it could be 10 years.

Upon completition of the 3-5 years he may refinance and pay you as well as your current mortgage company.

Once this has been done, take your current monthly mortgage and the monthly mortgage note for the mortgage you will carry. This will now become your friends monthly mortgage payment.

Once you get the monthly payment from your friend, send your current mortgage lender what is due him. The rest belongs to you.

Once this contract is drawn up you should take this contract to a closing agent or escrow, where they will prepare escrow instructions for you and your friend to sign, sort of like a reinforcement of your contract.

The escrow closing agent will set up a title company to record the necessary deeds, thus your friend will now own the home and will have to pay his own taxes and insutance. Make sure the insurance policy list you as a loss payee on the insurance policy. You will want to have your current mortgage company listed also. Look at your current insurance policy to find out the loss payee for your current mortgage company.

You might tell your friend that failing to keep the mortgage, insurance and taxes current is reason for you to foreclose on your property and insure him that you will.

If foreclosure becomes necessary there are firms that handle this type transaction in your city. You will need to find one. They will charge you a fee but it is normally collected throught the borrower or your freind or paid after the foreclosure sale.

Using this method he owns the home with all that goes with it, to include him paying the taxes,insurances and doing all the repairs of home ownership.

You get a monthly payment each month and can legally foreclose on him if he fails to make the monthly payment or pay his taxes or insurance.

I hope this has been of some use to you,good luck.

"FIGHT ON"

Answer 2

2

Answer 3

First question. Is the divorce final?

If the divorce is final, use a local title company or attorney to help you draft an agreement. (Land Contract or contract for deed)

If the divorce is NOT final, let him lease the property and do the agreement after the divorce is final. If you do anything that gives ownership rights while the divorce in ongoing, dowers rights and dividing mutual assets can cause both of you unintended consequences.

Answer 4

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Answer 5

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