I have been going through the process of finding my first property in Albemarle County, Virginia and have narrowed my options down to a few. After having reviewed my financing options and determined the amount of one time fees associated with the mortgage, I have decided to pursue private financing through a family member. We have agreed to set up a LC or Mortgage and Note that would be equivalent to the retirement return he has been collecting and institute a balloon payment down the line. My question is... how should we set up the purchase and subsequent sale to me (or rental agreement if needed) that would be most beneficial for the lender who is doing me a personal favor. Happy to provide more detail.
The entire transaction should be structured as if the parties do not know each other. That means a contract, which sets forth the price, the deposit, the amount of the loan, etc. It also means a title search, to make sure that the private loan will be a first lien on the property. A good first step would be to hire a local real estate attorney who conducts residential settlements and who can prepare the needed documents (contract, settlement sheet, deed, promissory note, deed of trust, etc).
The answer provided is for general purposes only, and in no way establishes an attorney-client relationship.
Mr. Sexauer is correct - again. That you are blessed with a family member willing to put money on the table is great. But IT IS NOT A DO IT YOURSELF TRANSACTION. There are a number of issues that need to be considered and addressed, and make sure the entire agreement is written and signed, so there are no misunderstandings. (I often say it's easier to stay friends with a well written contract) Find an experienced real estate lawyer to help guide you through this process.
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