Q: My neighbors are on the verge of losing their home because they can’t keep up with the payments. They are not behind yet in their payments yet, but it’s going to happen.
I would like to buy the house, but need time to clear up some credit issues. Can he quit claim deed the house to us? We would make the mortgage payments so that his credit won’t be compromised until we can buy it. Or is there another way to do this?
A: Your neighbor certainly has the right to quit claim his interest in his home to you and have you pay the payments on the mortgage. But the real question is why he would want to lose control over his house and lose any equity he may have in the home when you have your own credit problems to deal with.
Let’s go back to your neighbor’s issues. Your neighbor is in financial difficulties and is having problems paying his debts, including what he owes on his home. You want to buy his home but have your own credit problems and can’t buy it right now. If your neighbor has equity in his home–that is to say the value of the home exceeds the amount he owes to his lender–he would want you to pay him at least that before he would be willing to transfer the keys to his home to you.
Many people sell their homes to strangers when strangers say to the owners that they will keep up the payments on their old mortgage. The buyer would buy the home subject to the old loan on the property.
But if the new buyer stops making the payments to the lender, the only thing that new buyer loses is the home. That new buyer’s credit does not get hurt. If the lender found out about the sale, the lender could exercise its rights under just about all mortgages that are in the market to accelerate the debt. That would mean the lender is calling the loan in and would need to be repaid.
Frankly, this is one of the biggest scams going on right now, and savvy homeowners would do well to steer clear of strangers promising to make all of their financial problems go away if they would simply sign over title to their home.
Your neighbor would be taking a huge risk that you would fail to make the mortgage payments. If that happened, his credit would be shot, the home would be lost and he might be worse off than if he just let the lender foreclose.
Aug. 6, 2008.