How to transfer home ownership from one person to another with out a sale or realstate agent?

Question

Hi, a friend of mine is in a real big jam and can't no longer take care of the house he now owns here in Paterson, NJ. He has come up to me with the oppurtunitty of taking over the house and property by just taking over what he owns. This way his name is free and clear to buy an apartment in Queens, NY. The only catch is that he is behind on his taxes and owes like $7,000.00 which I will have to cover. He purchased the house a year ago for $437,000.00 and the house is a money making machine. The house is a 3 family unit. 1st floor is tennat occupied 3 bedrooms one bath for $800 (in my opinion should be more). The 2nd floor is a 3 bedrooms and 2 bath apartment and rents for like $1300 and the 3rd floor is 2 bed and 1 bath rents for $1,100.00. My main concern is how can I make this work by taking over the property and having all transfer to my name. I have never owned a house before and this can be a little confussing. Please tell me if you have done something like this before.

Answer 1

Try donation...

Answer 2

A quitclaim deed or warranty deed would transfer the ownership of the property to you. you can find one at your local staples, office depot, officeMax, etc. The taxes would become yours, but beyond that, the mortgage would not become yours. I assume he has a mortgage. Just transferring ownership of the property does not mean he is free of the mortgage. You can pay the mortgage on his behalf as the new owner, but it will still show up on his credit. The bank would have to approve a transfer to you. This can be easy or hard, depending on the bank and your credit. Also, make sure the property is not headed to the tax sale soon or you will have to put up that tax money pretty fast. It may be a good deal, it may not be able to happen. Find out about the mortgage first as that is the main obstacle. Then deal with the taxes and the transfer.

Answer 3

First off, you need to find out if the loan he has can be assumed. If it can't, you'll need to get your own financing. If it can, you'll need to be able to qualify for the loan in your own right.

I'm not sure how you figure this is a "money making machine" though. The P&I alone on a note that size will be over $2,700 a month at typical rates. Add property taxes, insurance, maintenance, etc. and you'll be lucky to break even on your cash flow.

At $3,200 a month in rents, your annual rate of return is only 8.8%. And that assumes zero for property taxes, insurance, maintenance, allowance for vacancy, etc. That hardly qualifies as a "money making machine" in my book.

Now, if you're going in with $7,000 in cash (back taxes) and can swing the cash flow, your rate of return at sale time may be an entirely different animal. That assumes that you can afford to feed the alligator for a few years while property values recover. On your $7,000 investment, you can return 100% or more annually IF you can afford to carry it. That can be a pretty big "IF."

That brings one last thought. Property values. What are comps selling for in the area now? Have values dropped significantly since he bought it? If they have, you may be inheriting his problem and be locked in for years waiting for a return on your investment. When a market bottoms out and values plummet, the recovery is long and slow. When the market crashed in TX in the late 1980s, it took over a decade for things to return to their pre-crash prices. I made a ton of money on that crash, but it took a LONG time for the ship to come in. Luckily the cash flow carried the properties but if it didn't I'd have been in a world of hurt.

Answer 4

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