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[MUSIC PLAYING] Brought to you by the Every Dollar App. Start budgeting for free today. Steve says, last year, my wife and I bought a home from a family member and have been living in it ever since. However, we didn't transfer the deed or title, refinance, or switch the mortgage to our names. Technically, the house still belongs to him and his wife because we wanted to keep their 3% mortgage rate instead of the 6% to 7% rate we were quoted. We paid $150,000 upfront when we made the deal, and we've been making the monthly mortgage payments since last year. Recently, we've reconsidered the deal and want to legally transfer the house to our names. The bank says they can't consider the $150,000 as a down payment because there is no contract. They suggested changing the sale price to $150,000 instead. Is this a bad idea for us? If we sell in the future, will potential buyers be confused about a low purchase price compared to the house's value? It's a lot going on here. A lot of mistakes have been made already. Yeah. Steve, what you did was unbelievably stupid. This is dangerous, really dumb and dangerous, OK? Let's just pretend. Let's pretend the couple you're buying this from had a car wreck, and it was an accident. But they get sued for $500,000, and they lose the lawsuit. There's now a lien on the house that they own for $500,000. You just lost your $150,000 in that scenario. Oh, if the bank discovers you've done this that the mortgage is with, they're going to call the loan 100%. You have to pay the whole stinking thing off, and 30 days are going to start foreclosure. There's a do-on-sale clause in paragraph 17 in the deed, the deed of trust that your relative signed, and he sold the house without the bank's knowledge under the table, and when they discover that, they'll call the whole mortgage and foreclose on him and take your house that you put $150,000 down. Dumb. Oh, if the house burns, you got no insurance, Doofus, because you don't own the house, and their homeowners insurance doesn't cover you as a renter. They had to transfer that to Fire and EC, and they didn't do that either. A landlord policy. So you guys have just lined up stupidity in a row and knocked it over like dominoes. Danger us. Also, you could get a 3% mortgage that any mirrors. Boop! You're killing me, dude. You're killing me here. Wow. You just rented very expensively. Yeah. And you gave the landlord 100%-- What you can do is write up a contract that says, I'm going to put down $150,000. And put down $150,000 and go to the closing table and get a mortgage. And do a normal house transaction where you now own the house and you now have a 6% mortgage, which is what you should have done from the very first moment. And if you don't and you want to just transfer it and just take over, you can't take over the mortgage, get a new mortgage in the amount of the mortgage, but what the bank is suggesting to you, that's fine too. I don't care. Get this house in your name now and shut up about your interest rate. You've got a whole lot more at risk than 3% here with the level of dumbness that y'all have engaged in here. Cheat, man. Just unbelievable. Question, Dave, you can't just make up crap like this. You have no idea what the implications are. So obviously-- He put it in $150,000. Would he have to get that back and then put it back in-- Well, you could just show it on a closing statement as a down payment. And you just show it on the closing statement because it's already been transferred to the owner. Reduce what the owner is going to receive. It can show-- but you have to have a contract that says this. And you can't have two contracts. It's called dual contracts. That's fraud. You can't have one you show the bank and one that's the real deal. You show them what you're doing. Put down $150. The money's already been transferred to them. Like it was an earnest money deposit. And you can do this properly and above board. Or you can just not show it. Now, if you buy it and you record the deed at the lower price to your other question, it does not affect the value of the property whatsoever. If you buy a half a million dollar house for $350,000, it does not make the half million dollar house worth $350. It makes it worth $500 because it was already worth $500. The house is not-- appraisals aren't done based on what you pay for it. Appraisals are done based on what other properties in the area sold that are similar. That's how appraisals are done. Unless everyone in the neighborhood sold for $150,000 less. Exactly. It's not going to affect it. Exactly. And so no, I mean, let's say you bought the house at a foreclosure or something at a bargain. Does that make it worth less? No. It's still worth what it's worth. You just got a deal. And so the last part of your question is not a problem at all. So if the bank, whoever the flip the bank is on this deal, wants to just give you a mortgage and put the property in your name at $150 off the price, and you guys go get a mortgage, that's fine. If you want to do a contract showing the total price and a $150,000 credit, you can do that too. Get with a title company. They can show you how to do that. It's not rocket science. But people do not do these deals your-- There's Mississippi deals on it. Oh, man. It works like this is a land contract or a contract for deed. People do those as well. It's the same mess. Same exact mess. And when you've got increasing interest rates or when people try to do this because they think they're taking advantage somehow, that-- But the risk that you're taking is unbelievable here. Unbelievable. The juice ain't worth the squeeze. That's what they say. Yeah. And oh, by the way, if you do change the insurance into your name as if you're an owner, you have to notify the mortgage company because they want proof of insurance. And when you notify them that that happened, that's going to indicate that there's been a transfer and the due on sale clause is going to be activated and they're going to call the mortgage. So that's how I know you didn't do the insurance because they would have already started a foreclosure on your butt. So I know you don't have insurance. You're screwed, man. Go get this fixed this week as fast as you can before this thing goes sideways on you. This is a disaster. It said last year they did this deal. And so this has been a long time. A lot of risk you've been sitting on. Let's drive the car out on the thin ice and hope it doesn't fall into the pond. It's going to fall, people. It's going to fall, you're going in, you're going to get wet. Ugh, oh, this just gives me a headache. You pushed anything. It's so scary, so scary. Well, I've watched people do, and you know, the problem is these dumb butt TikTok real estate scam artists people are how to go buy a house and really you don't have to take title to it. That's just stupid butt stuff, man, because you don't have control of the asset. And you, you know, the other party goes and gets an IRS lien, boom, the title's clouded, you're screwed. The other party gets sued to have me and daughter lien with a car wreck, but can you tell this has happened to people I know and I've worked in these situations trying to clean up these messes after they've happened. So yeah, get this thing fixed. And guys, you can't just make up real estate law while you and your buddy are drinking beer. That's not how this works. You can't, you don't get to change the way things go down, man. You got it. Well, I got to deal with this just transfer. Yeah, what exactly, you're killing me here. Come on, man. Wow. - That does sound like how that deal came out. - Oh, I'm caring to you. - All right, man, I'll just title it. Forget the title, just give me some money and we'll make yours. - I'm telling you, is it happy hour or over a serious back-up pot, one of the two? Something was going down here. It's just, oh, this is not wise. This is the Ramsey show. Wow, oh. - So what is the right way to do this? - Well, let's go back in time. - The right way to do it is to contract to buy the house, keep your 150 in your pocket, and go get you a 6% mortgage. - And is this something you'd bring in an agent? - If you don't have to have an agent, you just got to have a contract and you got to go get a mortgage company. - That's a mortgage. - And you got to get a title company to close the deal, right? And so title company can close the real estate and you get title insurance and then you can get proper homeowners insurance and the things you need to do when you buy a house and this was all for the 3% spread. - Oh, 100%. And the guy selling it is just a, he thinks he did him a favor and he said his relative or his friend up for a complete fall. - And there's risk on that guy's part too. He's got, I guess these weird with this rental situation. - The biggest risk is he could get foreclosed on. If he can't come, let's say the mortgage is 300 grand. - And he doesn't have the money. - And he can't get the household before they, 'cause somebody really sold to pay out, 'cause he got a pal 300 grand. They call that loan. If they activate that do on sale clause and they will. - This is 360 degrees of stupid. - Completely watched them do it. Create your free every dollar budget today, the simplest way to budget for your life.
