Minneapolis Real Estate Attorney Tips Regarding Disputes Over Real Estate and How to Avoid Heartache

Over the past six months, Morphew Law Office, a Minneapolis real estate attorney, has been contacted by several potential clients involved in real estate disputes with family members, friends and significant others.  These disputes can be avoided by taking certain reasonable steps before a handshake agreement becomes full-blown litigation.

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Basis of the Disputes

The common thread in all of these cases is that the persons living in the disputed homes (“Person A”) believed they were buying the property on an oral contract for deed.  At the time Person A thought they were buying the home on a contract for deed, they had bad credit and could not obtain financing to purchase the home.  This caused them to have a family member, friend or significant other (“Person B”) purchase the home for them, with the oral agreement that Person A would be responsible for all of the mortgage payments, property taxes, insurance and ongoing maintenance of the home.  The problem with this arrangement is that, certain exceptions aside, the statute of frauds indicates that the sale/purchase of real estate has to be in writing.  This means that without evidence of the sale of the property being in writing, Person A may only be considered to be a month-to-month tenant on the property and subject to being evicted with only a 30-day notice by Person B.

At the beginning of these real estate transactions things may seem like they will always work out and nothing bad will happen.  However, as we know, family and relationship troubles happen over time and what was once a nice gesture by Person B to financially assist Person A can devolve into full-blown litigation, costing the parties thousands of dollars in court costs and attorney’s fees. 

Put the Agreement in Writing

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As was previously noted in a prior blog post, one simple way to make sure Person A is actually purchasing the property from Person B, is to use a contract for deed to make sure their agreement is in writing.  In a contract-for-deed transaction, Person B finances the sale directly. Instead of applying to a bank for a mortgage loan, Person A pays Person B monthly installments until the purchase price is paid off. In such a case, Person A would immediately take possession of the property, but Person B keeps the title of the property until the purchase payments are complete. Contracts for deed are commonly used in cases like this to sell property to family, friends and significant others.

What Happens if the Agreement is Not in Writing

In one particular case, after ten years of Person A making all the mortgage, tax and insurance payments and doing all of the ongoing maintenance of the home, Person B told Person A they were merely tenants on the property and if they did not agree to pay additional monthly rent, Person B would have them evicted from the home.  Person A ultimately ended up moving from the home. As there was no agreement in writing confirming the sale of the home, Person A was left no choice but to initiate litigation in order to try to stop losing all of the equity they contributed to the home due to their significant financial investment.

An experienced real estate lawyer can ensure that any agreements related to the sale of property between friends, family and significant others are put into writing so everyone understands the terms of the transaction, which can save thousands of dollars in litigation costs.  If you are facing such a real estate transaction or dispute, contact real estate attorney Jon Morphew at Morphew Law today.