Legal Question in Real Estate Law in California

The mortgage is most likely not assumable. Most have a due on sale clause. THus the entire mortgage may accelerate and become payable immediately.

If your parents sell you a house worth 650, and you pay 350 ( or assume the mortgage), they have made a gift to you of $300,000. They need to file a gift tax return. This may greatly impact their personal estate plan.

Your parents do not have a loss for income tax purposes. This is a gift. They will have no loss deduction. If they have a cost basis of less than $350,000, they may, in fact, have a taxable gain. Their accountant needs to look at the issue. The gain or loss calculation has to do with cost basis subtracted from sale proceeds. We do not have that information in your question.

Your parents need to get to an estate planner with some tax knowledge. .

There is simply no way you can purchase the property for less than fair market value without negative tax consequences. I can see why they would not want to just sell it, if they have had it for a long time, as the capital gains taxes on a property that is not your primary residence can be ugly. Selling for below market, however, could trigger that tax AND then a tax return obligation on the gift of that value, as Mr. Christian has mentioned. The best solution I can think of would be to put it in an inter vivos trust with you as the beneficiary. Then you take over the payments. Is there a reason not to rent it out to pay the mortgage? Maybe rent to at least supplement the mortgage payment? The bottom line is that this greatly affects how much tax will be paid whenever the property is actually sold (WAY less if it passes to you by will or trust before it is sold). So you need to sit down with a qualified attorney to put this in the perspective of a complete estate plan.