Legal Question in Real Estate Law in Missouri

Exchanging Property Between Familty Members

I am looking for some advice on purchasing/leasing my brother's house. He currently has an extremely low interest rate on his mortgage. I don't have enough for the down payment, but enough for the monthly mortgage. We would like to set up 'rent to own' contract so we can both benefit. We want to keep the interest rate of the current mortgage. He can make money off the tax write off and the extra principle I pay. I would eventually like to buy the house in a few years for a set price minus some of the principle I've paid. Could you provide me with some guidance and advice on this? What stipulations do I need to be aware of?

Can a family member sell a $220,000 house to another family member for $185,000. What are the limitations on selling a house to a relative for a discount amount? Thank you in advance for all your help!!


Asked on 9/06/06, 12:18 am

2 Answers from Attorneys
Michael R. Nack Michael R. Nack, Attorney at Law

Re: Exchanging Property Between Familty Members

The legal method most often used to accomplish your purposes would be called a Lease with Option to Buy. The details of your arrangements with your brother would be included in the contract itself. It would be necessary to review the loan documents from the existing mortgage to be sure that entering into such a lease does not trigger a default clause and give the mortgage holder a legal reason to call the existing note due in full. If there is no problem under the existing legal documents then I know of no reason why you could not contract for any price you both agree upon, even if that price is below the fair market value. He is, after all, your brother. I have handled several situations like this, and I would be happy to help you. Please feel free to call me at the office if I might be of service.

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Answered on 9/07/06, 12:10 am
Joseph Burcke Joseph R. Burcke, Attorney at Law

Re: Exchanging Property Between Familty Members

I can help you structure your desired transaction. I will need to see the existing deed of trust (mortgage document) to see what, if any restrictions against transferring either ownership or possession exist that might trigger an acceleration of the mortgage. Assuming there is no restriction, We can create a lease purchase contract. As to the issue of price, it may be that the "discount" is within an acceptable range such thatit is at the lower end of reasonable price. To the extent that it is below market, the effect is a partial gift.

I will be happy to discuss this with you.

Please contact my office for a free 1/2 hour appointment to discuss this matter

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Answered on 9/06/06, 10:18 am


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