"Dave, I Went To Stupid University!"

Brought to you by the EveryDollar app. Start budgeting for free today. I think we went to stupid university and made a mistake and I'm just wondering what you would do in our case. We bought our home about a year ago and when we bought it we understood it was seller finance but the day we went to sign the papers like we didn't hire a lawyer in advance. That was probably our biggest mistake. When we got there it turns out it was more of like a seller kickback. Like they didn't give it to us with their money. They are using the loan they previously had. I did not realize that was like weird. So would you be concerned if you were me? Like would you go refinance? I don't understand. What do you mean they're using the loan they previously had? What do you mean? They didn't pay off the home with the money that we gave them. Okay so we paid like a one million dollar home. We paid $750 but still owed that extra like $300 and they just kept the loan they previously had. So they're not financing it out of their money. What is the balance on that loan? So the balance on their loan is $320 and we owe them $380. So we borrowed $60,000 from them and then the overall balance is $320 on the house. Has the house been put into your name? Yeah we have the title. So that's right I thought we were all above board but then I looked at it today online and it said it was a seller take back loan and I was like I've never even heard of that before. That's something somebody made up on TikTok. I've been doing real estate 40 years I've never heard that phrase. So seller take back. What this is is an illegal loan though because the when the mortgage company finds out and they will when they discover for instance that the homeowner's insurance that has to be reported to the mortgage company is not in the seller's name it's in your name. And it's in their name still so if anything goes wrong. How can that be? The deed is in your did you put the house in your name or not? Yeah the house is in our name. Then they cannot have insurance on your house. I can't buy insurance on your house it's not possible. Great so would you refinance like now? Yes. Okay okay. Because here's what's going to happen if that is a standard mortgage that's laying on the house in paragraph 17 on that mortgage it has what's called a due on sale clause. Due on sale means if that seller sells the house that mortgage becomes due in full and that seller has sold the house and when they discover it they're going to call that loan and they're going to demand that seller give them $320,000 in 30 days and if they don't they're going to foreclose on the house that you thought was yours. Great. But it's not okay but you have recorded a warranty deed into your name is that right? At the courthouse? Yes yes and that's where I thought we were legal because how you are legal you are legal you're just. Hey George here for Churchill Mortgage. Listen with interest rates dropping this might be your window to buy a home or refinance. Building equity through home ownership is still one of the best ways to create safety and security in your life and you decide when the time is right. And my good friends at Churchill Mortgage will give you a custom plan and a special offer so you can buy or refinance the smart way. Go to churchillmortgage.com slash ramsayoffer that's churchillmortgage.com slash ramsayoffer. This is a paid advertisement NMLS ID 1591 NMLSconsumeraccess.org Equal Housing Lender. You are legal you're just vulnerable because the seller is either a shyster or a moron or both. Okay okay because they don't understand that you cannot keep a loan in place with a due-on-sale clause in it and all right all current modern mortgages have a due-on-sale clause in them. If you got an FHA loan from 1972 it does not have a due-on-sale clause on it but they don't exist anymore because they've all been paid off that was 50 years ago. Okay so the uh but but you know so back in the day when I first started in real estate in the late 70s and early 80s we had all kinds of FHAs laying around that you could assume without a due-on-sale but those are have been gone for 50 freaking years. Okay so anyway this thing if you pulled up their mortgage deed okay the uh the trust deed in most states it would be you can it's a if it's a Fannie Mae a standard conventional loan you just flip it over do you see paragraph 17 it will say due-on-sale if the title is transferred the the it becomes a balloon note and they call the it's in default they call the whole loan and the seller does not have the ability to pay that loan off and so they're going to get foreclosed on and because the lien is still on your property you're going to end up losing the property so you need to get this refinanced and get these shysters or morons or whatever they are out of your life as fast as you can and you need a standard $380,000 mortgage and pay them off as far $400,000 mortgage or whatever you gotta go get to get them paid off as fast as you possibly can. How long have you had the property in your name? A year. Good because it's going to take 12 months before they'll look at appraised appraisal versus acquisition okay and so now they can look at appraisal and I assume the house is worth more than when you bought it probably yeah so uh you guys have any money you obviously put down everything you had right we did but like over this last year we saved up a hundred grand so I was just thinking we'd put some of that yeah I would yeah and if you can get a if you can just get like your credit union to give you a $300,000 mortgage oh okay you know just easy just something quick right or call Churchill Mortgage and they can help you walk through it but I would get this out of these people's names as fast as you possibly can and for god's sakes get the homeowner's insurance in your name you have $700,000 of equity if this thing burns down that's going to go to them that would be awful yeah yeah because the homeowner's insurance is not in your name and by the way you can't have insurance yeah insurance law is basic you have to have an insurable interest I do not have an interest in Jade's house legally so I can't go be buying insurance on somebody else's house that's so they can't buy insurance on your house this house is in your name they they their insurance policy is not valid yeah so you're gonna they're not gonna get the money you're gonna end up with nothing nobody's gonna get nothing because the insurance company's gonna go uh you didn't own the house yeah is that uh illegal like if that can't if something like that it's not illegal it just invalidates the policy so the like the insurance company's gonna go uh no I'm not we're not writing a check for a million dollars on a property that to the to the people that I are not our client and our client doesn't own the property right so this whole so it's not worth the paper it's written on oh that's a mess it's useful useless so there's so much wrong with trying to do what is effectively called a wraparound mortgage where they wrapped around the old mortgage and they carried back 60 and they wrapped around the 320 for a total of 380 you can't do a wraparound mortgage where there's a due on sale clause and I promise you there's a due on sale clause on there I promise you there is so um yeah that that's that's what you get into ouch scary scary scary scary yes get refinanced as soon as possible and get go and go buy insurance on your property today go buy homeowner's insurance today forget that they've got it and no we're not paying them for it because it's terrible paying their policy is ridiculous but that's why they didn't want to change the policy because when you change the policy names out it tells the mortgage company that we've sold the house and it activates the due on sale clause that does sound a little shifty well it's just dumb it's some somebody doing real estate on tiktok create your free every dollar budget today the simplest way to budget for your life