Mr. Feichthaler:

I had hoped I could purchase the house next door for my kids to move in to, and I finally have made an agreement with the neighbor. Unfortunately, my credit isn’t too good, and I do not have cash to buy the property. My neighbor agreed to not tell his lender about the sale, and provided me with his loan information so I can keep the payments going. I would deduct the amount he owes from the price I pay him. Do you see any problems with this arrangement?

— Michael K.

Dear Michael:

Having spent many of my formative years next to my grandparents, I truly understand the benefits of having family close by. Typically, a purchaser of a house with financing will obtain their own loan, and the seller (through the firm closing the title work) pays off their loan. Many times, like your situation, there is a hope that the buyer can step in the shoes of the current owner, keep making payments, and move in. Unfortunately, it is not that simple. If you proceed with the proposal, the seller will sign the deed to you, and you will keep making payments. However, the note between the seller and the bank likely provides for an acceleration, or “due-on-sale” clause. If the property is transferred, this act would be considered a default, and they could foreclose on the property if the loan is not paid in full. To protect yourself, you would need to coordinate with the lender to allow for an official Assumption of Mortgage, where you would stand in the shoes of the current owner. Without this protection, and the bank forecloses, you could wind up with nothing, depending on what the property sells for at auction.

With interest rates continuing to be incredibly low, I encourage all of my clients to seek out multiple lenders. Many who thought they could not obtain a loan found they were eligible asking multiple lenders. Whether you are able to obtain your own financing, or seek an assumption of the current mortgage, I wish you the best in your negotiation.

Eric P. Feichthaler has lived in Cape Coral for over 30 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, Cape Coral Historical Museum, and Cape Coral Kiwanis. He has been married to his wife, Mary, for over 18 years, and they have four children together. He earned his board certification in Real Estate Law from the Florida Bar. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator.

Mr. Feichthaler can be reached at eric@capecoralattorney.com, or (239) 542-4733.

This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.