Is it legal if I sell my house to my son for whatever he can afford at the present and then have an additional contract that says he will pay me the rest of the appraised value within X years?

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Is it legal if I sell my house to my son for whatever he can afford at the present and then have an additional contract that says he will pay me the rest of the appraised value within X years?

My son wants to buy my house and, although I haven’t had it appraised yet, I know it’s worth more than he can afford. I’d like to help him out but I need the equity in my home for my retirement.

Asked on January 31, 2017 under Real Estate Law, Missouri

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

Yes, that is perfectly legal: people can contract to have part of a payment deferred until later, to be then paid as either a sum certain (e.g. you specify the amount in advance) or as determined by an appraisal done at the time (i.e. when it's time to pay the balance, you and/or our son pay to have an appraisal done). There are some tax ramifications relating to the timing of payment, and if your son needs a mortgage, you need to meet the lender's requirements or criteria, but those things--while issues to be addressed (so speak with a CPA or tax preparer to understand any tax issues; speak to prospective lenders to structure any loans and make sure your son qualifies; etc.)--are essentially "details." The main thing is, what you propose is legal. You will want to be able to foreclose if the back-end amount is not paid, to make sure you can get the home back and re-sell it for the equity, so have a lawyer essentially draw up a private mortgage agreement for you and your son, so you can foreclose if necessary.


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