Dear Monty: Plan when selling a home
Reader question: My ex-husband and brother-in-law have a joint tenancy of five acres with a small home on it. My ex-husband owes me for child support for my younger son, so the state has a lien on it. My ex-husband wants to give his half to our two boys, but my younger son just wants to be bought out. My brother-in-law wants to sell his portion to my elder son as well. I’m willing to release the lien as long as my younger son receives his portion.
My elder son would like to buy everyone out and move there. He owns a home now and has a mortgage on it. If he can, he would like to keep it as a rental. If not, he is willing to sell it. We don’t know where to start the process. Should we go to an attorney, Realtor, title company or lender? Marion G.
Monty’s answer: It sounds like all parties are cooperating which makes the process straightforward. The wild card in this equation is; If your son has to sell his home first, will everyone be willing to wait, and for what length of time? A timeframe should be established to avoid conflicts in the future.
Make a plan
Consider one person quarterbacking the process to reduce the chances of a miscommunication with a single point of contact. Here is an outline of assignments the quarterback will manage, as you will need all of the services you outlined in your letter. There are other options in proceeding, but this option is the most efficient.
1. The quarterback should identify three real estate agents. An article that provides advice on how to find the right agent is at http://dearmonty.com/pick-real-estate-agent/. Ask each agent for a written competitive market analysis (CMA) for your ex’s home and your son’s home. When instructing the agent on your target timeframe ask the agent what listing price will bring a buyer within 90 days. Each agent will have a different valuation, which is expected. Every home has a range of value so a fair price should be between the most conservative and most optimistic valuation. An article at http://dearmonty.com/determining-a-homes-value/ explains why a range of value exists. This step leads to an understanding of both home values. Do not sign any contract with an agent at this point, because you are unsure which home, if either, will go on the open market.
2. When you reach an agreement on the purchase price of your ex’s home, and your son knows what his home is worth, your attorney can draft a purchase agreement. If you do not have an attorney, here is an article to help find a good attorney at http://dearmonty.com/8-tips-find-good-real-estate-attorney/. A good attorney will tell you upfront what it will cost to draft the agreement and an hourly rate if more help is required.
3. Now, with an accepted contract in hand, your son can seek a mortgage loan by following the suggestions outlined in an article at http://dearmonty.com/finding-a-home-mortgage/. It is important to interview several lenders, as lenders, like real estate agents, are not all created equal. Your son should have a good idea after speaking with three lenders whether or not he can qualify for a mortgage loan to buy your ex’s home and keep his home as an investment.
4. If your son can finance your ex’s home purchase then he will get a written loan commitment. That is the point you involve a title company to handle the loan closing and title paperwork.
5. If your son must sell the old house, he chooses from the three agents and hires one to find a buyer. Depending on the market and the home itself, it could take days, weeks or months to find a buyer. The agent shared a ninety-day listing price when interviewed, so there is an expectation.
6. When and if your son’s home sells, he can then close on your ex-husband’s house. Your son’s lender will require the lien paid from sale proceeds.
7. If your son cannot sell his house in the pre-agreed period, then you put your ex’s home on the open market. When you find the buyer, the lien must be satisfied to clear title.
There are some twists and turns that can evolve in any home sale that can change the outlined course, but now you have a planned starting and ending point.
Richard Montgomery gives no-nonsense real estate advice to readers’ most pressing questions. He is a real estate industry veteran who has championed industry reform for over a quarter century. Send him questions at DearMonty.com.