Can I Short Sell My House to a Relative?
In housing, a short sale occurs when the lender allows the borrower to sell the house for less than the amount due on the mortgage. Although it might be generous for a relative to offer to buy your property, most banks do not allow this practice.
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Facts
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Most banks are leery of approving a short sale to a family member because of the possibility of collusion--giving the family member a discount. To protect against collusion, most banks require the borrower to sign an "arms length" contract that prohibits the sale of the property to family members or business associates.
Considerations
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No matter who buys the house, the bank will investigate the reason for the short sale and the terms of the transaction, such as the borrower's financial and payment histories.
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Warning
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In general, it is advised that people involved in a short sale do not sell to a relative because it may look like you are trying to deceive the lender--even if you have honest intentions. Someone could, for example, sell the house to a relative when he knows a higher offer is on the table. Or the relative could quickly resell, or "flip," the house for a profit. Federal law makes it a crime to deceive a lender or withhold information.
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References
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- Photo Credit for sale sign image by jcpjr from Fotolia.com
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Comments
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WHY IS NOT A CRIME THE DECEPTIVES PRACTICES THE BANKS USE AND IS IT IS THEY GET AWAY WITH IT?
