How to protect myself if I’m co-signing on a home loan for a family member and once the loan is secure they are supposed to give me 10k for co-signing for them?

The house is going to be purchased by my uncle then flipped. He has been renting the house for the last year and already made all the necessary repairs to be able to sell it quickly. He’s purchasing the house for 80k from the original owner then is planning to turn around and sell it for 170k. Hopefully, the loan will only be in my name for a couple months until the house sells. What is the best way to protect myself in this kind of investment?

Asked on June 25, 2012 under Real Estate Law, Florida


B.H.F., Member, Texas State Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

It seems you know the risks associated with this deal--"hopefully, the loan will only be in my name for a couple of months..."  If the house doesn't sell, you will personally be on the hook for the balance on the note until it does sell.  If the house is struck by a hurricane or other disaster while you are waiting on it to sell, then you will still have to pay on the note.  So if your question is really "how not to loose any money," then the answer is to not put you name on the note.  Hundreds of relatives co-sign notes every year... and every year families get very hurt feelings when the person defaults and the family member is stuck holding the back.  Once you agree to have your name on the note, there really is nothing you can do to protect yourself from the potential associated loss-- except maybe to make sure that you have the cash on hand to pay the note in the event the house does not sell quickly and your family member can't make the payments.

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