Legal Question in Real Estate Law in California

Re: Helping a friend finance a house in California

Just deed the house over to her. On the property transaction report form (she fills this out and sends it in with the deed) she can show an 'X' the box next to the transfer was part of her financing. As to the financing, when the deed is recorded and reported to the creditor, they may start foreclosure. So you may want to check with them about her assuming the loan all by herself; or do the deed, give it to her, and let her hold it.

Re: Helping a friend finance a house in California

My first question is, what will you do if she doesn't make the payments, and you have deeded the house to her? She could stay there for months, while your credit is destroyed.

I am not saying that is going to happen, but, unfortunately, I have seen it many times.

What you may want to do is deed her 1/2 of the house with a co-ownership agreement until such time as she has the credit to refinance or assume the mortgage.

Depending on what kind of loan you have, there could be due on sale issues, pre-payment penalties, etc.

For more information, give me a call. 925-924-0100.

Re: Helping a friend finance a house in California

This is an unusual way to carry out your purposes. Did you inquire about becoming a guarantor at the time of your transaction? And, is the agreement between your friend and you in writing, signed before a notary?

When property is bought using X's money but title is held in Y's name, and unless X and Y are related, the law will regard Y as holding title in trust for X under a 'purchase-money resulting trust.' Since X, the beneficiary, has a right to be 'on title' and to possession of the property, a transfer carrying out that right and delivering possession should be tax exempt.

You should use a quitclaim deed and indicate that the transaction is to deliver legal title to the equitable owner.

The advice from Messrs. Hobbs and Koenen is also sound. Your biggest current problem is with the lender. You also have a future worry about faithful performance of your agreements. You might seriously consider doing a refinancing and handling the quitclaim through the refi escrow. You should untangle your affairs as much as possible, as early as possible.