Q: I recently got into contract to buy a foreclosed home. I put $35,000 down, and the closing is in a couple of days. The first day I hired my title attorney I mentioned to her that I wanted my mother to be on the deed in order to get the taxes reduced. Now, the lawyer is telling me that I have to wait until after the closing, do a new title search under my Mom’s name, and pay the attorney again to include my Mom on the deed. I feel like it’s too late to stop everything now — what did I do wrong?
A: It used to be the case that you couldn’t put a co-owner who was not also a co-borrower on title during the course of a purchase transaction. As an outgrowth of the foreclosure crisis, however, most lenders now recognize that many buyers/borrowers would simply put their parent or spouse on title after closing, which caused the lenders lots of problems when they wanted to foreclose on properties co-owned by a borrower and a nonborrower.
As a result, many lenders will now allow a co-buyer/owner to go on title during a purchase transaction, even though they are not a co-borrower on the mortgage loan. This way, they can make all the required disclosures and obtain the co-owner’s acknowledgment and understanding that the property is securing a mortgage and will be subject to foreclosure on default.
So, your request is/was a doable thing, although it might not have been in the past. You might have selected an attorney who is not aware of these recent changes, or does not understand how to effect them. The solution she has proposed — putting your mother on title after closing — is the old-school way of handling this situation.
Although your arrangement is feasible, logistically, I’m concerned about your plan to use your mother as a faux, or "straw," owner just for purposes of obtaining what I’m assuming is a sort of senior’s tax advantage.
I’m making some assumptions here, but you might be in violation of the tax law guidelines if your mother will not be an occupant or bona fide owner of the property, and is rather an owner in name only so that you can receive the tax benefit. Consult with a real estate or local tax attorney for details on how to keep your nose clean in this arena. …CONTINUED