Dear Customer (name blocked for privacy),

There are some problems I see in this contract. I see a lot of these, and they are not secure contracts. They are defective.

1. The first big problem is, that while you have a contract with the owner to purchase the home, the owner still has a mortgage on the property. The mortgage is a secured loan, with the home being collateral for the loan.

• If you do not pay the owner on your contract, the owner has no recourse in terms of liens and such. However, the owner is still required to pay the mortgage, regardless if the payment from you is made on time or not made at all.
• If the owner does not pay the mortgage, even if you are on time with the contractual terms, then the bank can foreclose on the home, despite your on time payments. This is because the mortgage lien on the home follows the home, not the person who might have a contract to buy on time payments. This puts all of your investment at risk.
• Generally, a person may not sign a contract to sell a home separately without the mortgage holders' permission. This of course depends on the terms of the mortgage. You most likely do not have knowledge of the terms of the mortgage, unless you have access to the mortgage documents. if you do have access, you should read the terms closely.

2. I do not agree that this is necessarily a legal and binding contract. You should seek an attorney skilled at contract law to go over your contract. In order to be a legal contract, the owner would have to be able to deliver on the home. You are agreeing to buy a home, that they can deliver. Even if it were a legal contract, then at the point where the owner is no longer able to deliver the home, (the foreclosure), then the contract would be void. You may even be able to recover, through a law suit, all of your monies paid. Registering the contract really does not make a difference.

There could be no transfer of the deed without permission of the mortgage company who held the first lien position. Transferring the deed or title is the first step to getting utilities, taxes, etc in your name.

My advice is to terminate the contractual relationship, through a law suit for breach of contract. You should be able to get your money refunded.

30,000 is not a very large sum of money in today's terms. If you have this money available or have a good credit rating, you should work out a deal to take over the loan. The relative can accept the money's already paid as down payment. This will get the bank involved, as they should be. The bank will write the terms as another mortgage for the balance to you.

You can work out a rental deal with the other family member, if they have a need to continue to live there.

As long as the family member pays fair market value for the rents, then you would be able to take some passive income and losses, which is a big tax advantage for you.

The bottom line here, is I question the legal position of the underlying contract. The contract had to have been made in good faith, and the family member would have had to have the right to transfer or deliver the home, which they could not due without closing the mortgage or getting the mortgage holder's permission. Good faith extends to the person being able to or following through on making the mortgage payments so that your investment and interest in the home were protected.