Ownership question

[hkcon]

What is the name of your state?NV
My wife and I are theoretically buying a home although it is in my wife’s aunt’s name. We put up the down payment and have made every payment on it to date on time. The aunt has informed us that we must get her off the mortgage in less than 2 yrs. and with our credit situation, bankruptcy 5 yrs ago and foreclosure shortly thereafter I suspect getting a loan maybe problematic. I am thinking selling it might be the only way to go but how could the money we have about $100,000.00 in equity, be given to us? I am afraid we may have to pay a huge tax if it is given to us. Anybody got an idea that might help us out?

 

[PayrollHRGuy]

How much is the house worth? How much is owed on the mortgage?

 

[adjusterjack]

My wife and I are theoretically buying a home although it is in my wife’s aunt’s name.

Reality check. It's not your house. It's your aunt's house. She owns it. To sell it she would have to sign everything. Whatever the equity is, she will get the check for the sales proceeds. She will pay tax on any of the gain over the purchase price since it's not her primary residence.

Since there is $100,000 in equity you might not have too much trouble getting a mortgage loan for just the balance that is left on the mortgage. Start looking now.

Then you buy the house from her and get the deed when the original loan is paid off.

If you buy it from her for the amount of the loan balance she won't pay any tax but she may have to file a gift tax return for the difference between the loan balance and the market value but she isn't likely to have to pay any gift tax because of the lifetime exclusion.

 

[LdiJ]

Reality check. It's not your house. It's your aunt's house. She owns it. To sell it she would have to sign everything. Whatever the equity is, she will get the check for the sales proceeds. She will pay tax on any of the gain over the purchase price since it's not her primary residence.

Since there is $100,000 in equity you might not have too much trouble getting a mortgage loan for just the balance that is left on the mortgage. Start looking now.

Then you buy the house from her and get the deed when the original loan is paid off.

If you buy it from her for the amount of the loan balance she won't pay any tax but she may have to file a gift tax return for the difference between the loan balance and the market value but she isn't likely to have to pay any gift tax because of the lifetime exclusion.

I don't think that a gift tax return or a gift letter will be necessary, I get the impression that the equity is due to what they have paid, and that would be legitimately a down payment or informal contract payments. Its not a gift, because they have actually paid the money.

 

[hkcon]

How much is the house worth? How much is owed on the mortgage?

$248,000.00 Zillow est
Less than $150,000.00 owed (could be around $134,000.00)

 

[hkcon]

Reality check. It's not your house. It's your aunt's house. She owns it. To sell it she would have to sign everything. Whatever the equity is, she will get the check for the sales proceeds. She will pay tax on any of the gain over the purchase price since it's not her primary residence.

Since there is $100,000 in equity you might not have too much trouble getting a mortgage loan for just the balance that is left on the mortgage. Start looking now.

Then you buy the house from her and get the deed when the original loan is paid off.

If you buy it from her for the amount of the loan balance she won't pay any tax but she may have to file a gift tax return for the difference between the loan balance and the market value but she isn't likely to have to pay any gift tax because of the lifetime exclusion.

The bigger reality check is she could just say “ we were just renting from her” and take all the money, I am aware of reality believe me...

 

[hkcon]

I don't think that a gift tax return or a gift letter will be necessary, I get the impression that the equity is due to what they have paid, and that would be legitimately a down payment or informal contract payments. Its not a gift, because they have actually paid the money.

Ty for the info

 

[Zigner]

I don't think that a gift tax return or a gift letter will be necessary, I get the impression that the equity is due to what they have paid, and that would be legitimately a down payment or informal contract payments. Its not a gift, because they have actually paid the money.

Huh? Real estate agreements must be in WRITING. There are no "informal contracts". In essence, the OP has paid rent.

 

[LdiJ]

Huh? Real estate agreements must be in WRITING. There are no "informal contracts". In essence, the OP has paid rent.

The aunt is perfectly free to consider what you call "rent" as a down payment. It certainly was not a gift since it was money actually paid out. There is absolutely nothing in the law that prohibits the aunt considering the money to be a down payment.

It is true that an enforceable real estate contract needs to be in writing, but most families will honor a handshake agreement.

 

[Zigner]

The aunt is perfectly free to consider what you call "rent" as a down payment. It certainly was not a gift since it was money actually paid out. There is absolutely nothing in the law that prohibits the aunt considering the money to be a down payment.

Except that it wasn't.

 

[Death-b4-Taxes]

Try to get this part "...has informed us that we must get her off the mortgage in less than 2 yrs." in writing with a more specific timeline. Today and right now qualify as "less than 2 years." I was in a similar situation once and regret not getting specifics on the timeline.

 

[LdiJ]

Except that it wasn't.

In your personal opinion it wasn't. I don't happen to agree with you. As I said above, families often have handshake agreements, even with real estate, and many, maybe even most of them honor those handshake agreements.

 

[PayrollHRGuy]

families often have handshake agreements

And when a family member decides they don't want to go along with one of the verbal contracts the other family member is screwed.

The aunt has already changed the agreement once. There is no reason to think she won't again.

 

[not2cleverRed]

In your personal opinion it wasn't. I don't happen to agree with you. As I said above, families often have handshake agreements, even with real estate, and many, maybe even most of them honor those handshake agreements.

But some of them don't.

And when someone doesn't honor a handshake agreement, the other party can get the shaft, because there is no proof of the terms of the handshake agreement. It becomes a question of who remembers (or claims to remember) what.

OP is worried that auntie could become one of those that don't honor the handshaking agreement, and is asking how to protect their household.

 

[not2cleverRed]

And when a family member decides they don't want to go along with one of the verbal contracts the other family member is screwed.

The aunt has already changed the agreement once. There is no reason to think she won't again.

Fixed it for you.