My friends want to buy my short sell houseto help me and intend to deed back the house to me in 5years

UPDATED: May 16, 2009

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My friends want to buy my short sell houseto help me and intend to deed back the house to me in 5years

Will my friends and/or I have Tax consequences when they deed the house back to me? Will I have any problem with the lender of the short sell when they know I get the house back?

Asked on May 16, 2009 under Real Estate Law, California


J.M.A., Member in Good Standing of the Connecticut Bar / FreeAdvice Contributing Attorney

Answered 13 years ago | Contributor

I suggest that you do this as follows:

Have your friend represent to the bank doing the short sale that he is buying it.  they dont care if he is renting it out or living there himself.  the bank does not need to know that.  Before the short sale you and your friend should execute a 5 year lease that contains an option for you to buy the house.  this way, you can secure the house (i.e. continue to live there for 5 years) and if you later decide you dont want to buy the house, you dont have too.  When you go to buy the house, your friend will pay taxes on the house (capital gain treatment) on the proceeds above 250K. You should have a lawyer draft the lease with the option to buy.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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