Holding a mortgage can be safe under certain conditions
Q. I have owned a two-family rental home for more than 30 years. It has been paid for long ago and has been a nice source of income. I have decided to sell this property. I have not listed it yet. I have someone who is interested in buying the property. This person wants me to hold the paper on it.
I have talked over the pros and cons with my lawyer and accountant. I have decided that holding the mortgage is feasible for me at this time. I have three questions: Should I ask for 15 percent or 20 percent down? And what is a reasonable interest rate that I can ask at this time? And last, is it OK to ask for a 5-year balloon?
A. Yes, you can ask for 20 percent down; that figure represents safety for the loan. Yes, you can ask for a 5-year balloon. You can ask for anything. The question is, will the buyer be willing to accept your terms and able to handle the payments comfortably? If not — and I'd guess probably not — you're in for some negotiation.
The most important question is: Does this person usually pay bills on time? I assume you've had those professionals help you analyze the prospective buyer's credit report. The buyer may be an investor who has trouble placing bank loans on too many properties. In that case, if the credit report is good, you're probably safe lending the money. The other possibility is that a would-be homeowner cannot qualify for a bank mortgage. If so, you'll have to analyze his or her financial situation carefully. Do you want to lend that much money to someone the banks consider an unacceptable risk?
In either situation, the seller who holds a mortgage usually requires a higher than average interest rate in return for assuming the risk and waiting to collect the sale price over a period of years. I hesitate to name specific amounts, but your accountant may have a suggestion.
Q. Can you suggest the most efficient way to assure that the ownership of my house goes to one of my daughters on my death? Put her name on ownership papers now? Put instructions in my will? Other?
A. You're right in suspecting there are even more ways to assure that your daughter eventually owns your house. But to find the most efficient means, we'd have to consider a lot of factors — things like your cost basis for the house, your total estate, the composition of the rest of your family, your age and health, your daughter's financial and marital situation, why this is your goal and even the state in which you live. Anyone who's read this column very long knows what I'm going to recommend as strongly as possible.
Consult a lawyer who specializes in estate planning or elder law.
Q. We paid off our mortgage about three years ago and neither my husband nor I were aware that we needed a certificate of satisfaction. (We're starting to think about retirement and selling our house.) I was surprised when I checked with our local county clerk's office to find that they did not have anything on file. I called the lender and they said it had been sent. They are re-sending a copy so hopefully, by the time we put our house on the market, all will be in order.
And now my question: The city and county have our street spelled wrong. The way they have it is not the same as our deed or the way you see it listed on any of the real estate sites like Zillow or Trulia. I grew up around here and I know it's wrong, but when I called about making a change the city said that it would cost too much to change. I'm concerned about a problem when we put the house on the market and people try to search in the assessor's records. Doesn't the city/county have an obligation to properly list all streets? Could a problem also arise if emergency services — fire or ambulance — were called? How should this issue be addressed?
A. As for your street address: At first I wondered if it might be your deed that had the typo — but no, there are those Internet sites also. So here's another "I don't know" answer. If it's any consolation, other houses on your street have probably been sold with no particular legal problem, so perhaps you won't have any.
• Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.
© 2013, Creators Syndicate Inc.
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