Legal Question in Real Estate Law in California

Re: Selling house to family below market with a lien?

What you do is sell the home at full market value, but carry back a second deed of trust which is secured by the property (just like an equity line of credit is done).

The risk is that they don't pay on the first, and you will need to do so to protect your interest. There is also the risk that the value of the property could go down, which would only affact your position, not that of the bank.

Then, after a few years, they can refinance an pay off your balance.

Re: Selling house to family below market with a lien?

I think what you are contemplating is "carrying back" a note and deed of trust to secure repayment of a note for 30% of the purchase price, a very common transaction; further, "lien" is another word for an encumbrance or "mortgage" (except in california we do not technically have "mortgages", we have notes secured by deeds of trust). The only reason market value would have any impact is if they are getting a loan to purchase the house from you; if so, that loan would be a first deed of trust, and your carried back loan would be a second deed of trust. The note for which your deed of trust is the security should provide for either monthly payments, or a "balloon payment" when the entirety of the money is due; if it is a balloon payment, you need to comply with civil code requirements of notification prior to the date of the balloon payment. If the buyers fail to live up to the payment arrangements set out in the note, then you can foreclose on the note and deed of trust to get the property back.

Re: Selling house to family below market with a lien?

The most ideal means of accomplishing your goal is for you to sell them the home at the current market value as a direct seller. You retain a Deed of Trust in the property for the payments.

You then have the option of foreclosing on the Deed if they miss payments, but you are not required to do so.

This can also be used as a means to keep your taxes lower on the sale.

There is also the option of creating a lease for a term of years with the remainder to them upon payment of a sum certain. This can be effectuated through a trust instrument. Again there can be significant tax benefits to this transfer as well.

For some additional information about trusts, please visit our firm's web site at www.No-Probate.com or feel free to contact me directly at 626-578-0708.

Take Care and Good Luck!

Scott Linden