HELP! Sell house to in-laws to re-fi? Legal?

[Tomlor]

We live in NY, and have owned our house for 16 months. Due to serious financial problems, we are behind on our mortgage, and our credit rating stinks. Rather than lose the house, a mortgage broker recommended by our accountant suggests that we sell the house to a family member with good credit, who can get a higher loan-to-value, than us. It would end up paying off the old mortgage, paying our $20K credit card debt, our $11K car loan, and pay for the much needed heating system upgrade on the house, and leave money leftover for other home repairs. The monthly payment wouldbe much more manageable than all the combined payments we have now. We would then have our names added to the deed later, and buy back the house in a few years when our credit is better. Is this legit? As I understand it, the only risk is to them if we don't pay the mortgage, their credit is damaged. We will be formally consulting attorneys, but I'm climing the walls waiting, and I need opinions.

 

[HomeGuru]

It is legal. Be aware that the family member must qualify for an investor loan with a higher interest rate rather than an owner/occupant loan if this family member is not going to live at the property.

 

[Tomlor]

I know about the interest rate, but their lawyer has told them that it is very risky for them, and possibly for us. Is this done alot? (My accountant says its done all the time in cases like this). Their attorney says they'd be better us just giving us $$$$ to cover debts, and then we can re-fi just the house, no cash-out. But we want to PAY our debt, not "win Family Lotto", it seems irresponsible. I also think that an attorney must specialize in real estate to properly handle the first option, as oppsed to a GP. What do you think?

 

[HomeGuru]

I know about the interest rate, but their lawyer has told them that it is very risky for them, and possibly for us.
**A: your question was "is this legit?" Of course the transaction is risky for both parties for obvious reasons. That is why every downside for each party needs to be addressed and accounted for ie. buy-back provisions, repair/maintenance and other expenses, tax consequences, death of new owners, estate, trust....
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Is this done alot? (My accountant says its done all the time in cases like this).
**A: yes.
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I also think that an attorney must specialize in real estate to properly handle this, as oppsed to a GP. What do you think?

If the GP has knowledge of these matters and has experience in doing a number of these specifc type of transactions, then ok.
Otherwise consult a real estate attorney that has knowledge of the above.