Legal Question in Real Estate Law in California

Re: Transfer of Real Property

The deal you entered into with the stranger is what is called a "home equity sales contract." I urge you to look up California Civil Code sections 1695.1 through 1695.17, which provide a comprehensive set of homeowner protective laws with respect to these deals. The bottom line is that home equity sales contracts are legal, but must meet certain guidelines.

Note that section 1695.3(d) requires that the contract contain a complete description of the terms including any services that the equity purchaser will perform for the equity seller before or after the sale. Therefore, the promise to pay off the mortgage should be written into the contract.

Section 1695.4 provides a five-day right to cancel. I assume you are beyond the five-day point, so this isn't helpful.

Section 1695.6(d) forbids the buyer to make any untrue or misleading statement about the transaction. I suspect your buyer violated this section; if it can be proven that there was a misrepresentation, the buyer may be liable for criminal penalties under 1695.8. You can also sue for substantial damages in a civil suit under section 1695.7.

I did not notice any specific provision in the law that requires equity purchasers to pay off all existing financing. On the other hand, once you no longer own the collateral, and unless you could be liable for a deficiency judgment or are concerned about possible further negative impact on your credit rating, the buyer's failure to pay off the loan should be of limited concern to you.

Re: Transfer of Real Property

He has violated a California Civil Code enacted to protect people in your sitation. You can rescind the grant deed and seek damages and civil penalties from him.