It's not so much illegal as just a bad deal for you. A special warranty deed will transfer the house into his name, while the loan (and liabliity for the payments) will still be in your name. In addition, there may be a provision in your loan documents which would give the lender a right to require payment of the loan in full due to the sale.
See if the bank will let him assume the loan, (which still won't let you off the hook completely) or find a buyer who will pay the house off with their own loan.Ask a similar question
A few things:
1. Assuming this house is in both you and your husband's name, you need to get your husband's name off of the title before you do anything.
2. If you deed out to the John the Realtor, then you don't own the house. You're just on the hook for when John the Realtor doesn't make payments and gets foreclosed.
It's not illegal, but it likely violates the due on sale provision of your deed of trust. Better course of action is to clear title and sell the house outright. Most of the times when people try to do these deals, they make a mess. There's something to the "tried and true" way of dealing with things. If you're unable to sell the house, then ask the bank for permission to do a 'short sale' and list it with a broker who specializes in short sales.
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As the other respondents stated, it is not illegal. It's also not horribly unusual these days because of the mortgage mess. I agree that it would almost certainly violate the due on sale clause that is almost certainly in your deed of trust. With that being said, the way you explained it isn't quite how they are usually done.
Typically, these transactions are a measure of last resort. In other words, you have tried to sell the house on a short sale and either the house is too far underwater or the bank will not otherwise agree on an acceptable price. Typically, you should receive some down payment in the form of cash, especially if your bank loan is non-recourse. Additionally, you should have security in the home if he fails to make the payments.
If you are otherwise searching for alternatives, then you could call the bank on some sort of a cash-for-keys program where the bank pays you money to deliver the home to them without any fuss and in good order.
Regardless, you should probably hire an attorney if you are going to do the deal with the realtor.
The above statements are provided as general information and not intended as legal advice. Each matter has its own set of unique circumstances that cannot be adequately addressed without consultation. You are strongly advised to hire an attorney licensed to practice law in your state to represent you.Ask a similar question