Sell my home to church w/owner financing of some type? (Seattle: sale, real estate)

[beringsea]

I own, and live in, an eight-bedroom house in Seattle, WA. I rent out the other rooms at low rent to homeless folks who are working, so they can save for an apartment. I want to sell the house to my church, as I am getting old and need to save for my old age care.

I want to do this through some form of owner financing, but I know nothing about it, and what I read online is not very clear. In most cases, what I've read doesn't really apply, because I don't want to make money off the deal, I just want to transfer the deed to the church and have them pay the mortgage I'm paying now. I have a 3.5% interest rate, 29 years left on the note, owe $223,000. I want them to own it if at all possible, as when I die, I don't want them to have to deal with a will and with probate, estate taxes etc.

Can anyone advise me as to the best way to do this? If you are a mortgage broker and can do it, more than happy to talk to you. The broker I used to buy the house can't loan to an entity, only individuals, so I need someone new.

Thanks!

[homesinseattle]

As it is such a solid market for sellers, why not sell it on the open market, get the most money you can and donate money to the church? The sale would probably be clean and simple, the results would benefit the church and you. Sounds like you could benefit from talking to a CPA also, who could advise you about easy will and probate solutions.

[beringsea]

Ah, I understand. I should have been more clear, my bad. The church will be continuing to rent it to the homeless folks, and me, for low rent, but as the mortgage payment is low, they will make a profit each month. Hence the motivation for them to buy it.

[homesinseattle]

I understand. Just know that if the home is in Seattle and as sizable as you say, you are probably giving away a tremendous amount of equity to the church.

[noah]

Owner financing is usually only possible when you own the place free and clear. You would have to pay off your mortgage at the time you sell to the church and since they won't be giving you a lump sum to pay it off but instead paying you a monthly payment (you will be the bank) you would have to have other funds to pay off your current mortgage at closing. Sounds like what you want is for the church to take out a loan from a bank (not you) and buy the house from you at below market.

You mention you want to sell because you need to save funds for old age but sounds like you essentially want to give a gift to the church by giving them a below market price. If you need the funds maybe you should sell at market and donate to the church when it is clear you won't need the funds for your own well being.

[noah]

Sounds like you want to donate it to the church at your passing and are thinking its better to transfer title now. You need a specialized lawyer to help advise you (Estates and wills attorney?). Often gifting before death large amounts can cause bigger tax issues but given its to a non profit this may be different.

Originally Posted by beringsea

Ah, I understand. I should have been more clear, my bad. The church will be continuing to rent it to the homeless folks, and me, for low rent, but as the mortgage payment is low, they will make a profit each month. Hence the motivation for them to buy it.

[beringsea]

I understand. Is there any kind of agreement where the church pays the mortgage but, as you say, does not own the house because of me not owning the house free and clear? is there some type of rent-to-own deal that would work?

[Pughnose]

The potential tax ramifications are terrifying. If you get your mortgage paid or a subsidized rental rate or other benefits as a result of your "donation" then they might be considered taxable capital gains and the donation might be classified as a sale, and did you say you deducted it, M. Beringsea? Please have a seat and the nice IRS agent will be right with you, while we go through all the paperwork you ever filed....

If the documents are not written up properly, there are probably a dozen ways your good deed could go sideways. Please consult with a lawyer who's expert in this stuff.

[perigee]

Something seems very off about this whole arrangement, are you sure someone is not trying to take advantage of you?

If you want to save money for your retirement it would make sense to sell your home, give a tithing to your church and donate something to a nonprofit that specializes in working with the homeless.

You can't do owner financing, because you don't own the home the bank does. As for estate taxes, they only apply if your estate is worth more then $5 million dollars.

I would highly recommend talking to a financial adviser and also have your home appraised by either a professional appraiser or have a couple of real estate agents come out and if give you an idea of what it is worth.

Giving to your church is good, but what experience do they have running a temporary housing situation, what is their liability or tax implications? What if someone in the organization changes their mind and decides to sell the property, you could find yourself homeless.

[seasallyttle]

You cannot transfer a mortgage to a new buyer. That said, there are ways to accomplish your goal but you definitely need to see a Real Estate Attorney. Protect yourself first and make sure you are covered legally in the deal so that everyone gets what they want and does not get hit with any surprises at any point. It will be well worth the money.