Full question:
A family member offered to purchase the home of another family member for $400,000.00. A contract was written but not on standard real estate forms for Pennsylvania. Also, no money exchanged hands between the parties except that the new owner paid off the mortgage balance which was $160,000.00. According to Public Records the new owner paid $280,000.00 not the $400,000.00. Eventually the new owner received a bill from the previous owner for $160,000.00. Is it possible to charge a new owner for repayment on the mortgage payoff after the property was purchased?
- Category: Real Property
- Date:
- State: Pennsylvania
Answer:
A purchaser, seller, and mortgagee (e.g., the lender who made original loan) may enter into an Assumption Agreement of Mortgage and Release of Original Mortgagor. In such an agreement, the new purchaser of the property assumes and agrees to pay the debt to the mortgagee; the mortgagee releases the original mortgagor (seller) from any future liability on the loan. Now, any default on the loan secured by the mortgage would make the new purchaser liable to the mortgagee.
A purchaser and seller may also enter into an Assumption Agreement of Mortgage which does not release the seller from the indebtedness. In such an agreement, the purchaser promises the seller to pay off the mortgage loan, but the mortgagee does not release the seller. Upon a default, the mortgagee will look to the seller for payment of the debt and the seller will look to the purchaser for payment of the debt.
Why would the seller never receive any proceeds from the sale? A promissory note may be given by the purchaser to the seller rather than cash.
Why would the purchase price be different on the "contract" than what was recorded on Public Records?
A mortgage is a document that pledges a property to the lender as security for payment of a debt. This document is recorded in the office of the recorder of deeds of the county where the property is located. While mortgages normally state the amount of the loan, the selling price of the property subject to the mortgage is not required to be stated on the mortgage document.
Also, there is no requirement that the actual amount paid for the property be stated in the deed to the property.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
