Q: My son and I are both on the deed of the house, but only he is on the mortgage. He no longer wants to pay the mortgage payments. I am retired and cannot afford the mortgage. Do I need his permission to sell the house? –Nelly, New York
A: Whoa, Nelly! (Sorry, I couldn’t help myself.) So, you and your son are co-owners of the property, meaning that you are both named on the legal title. However, he’s the only one who is named on and, thus, bound by, the mortgage.
Generally speaking, in these situations the roles are reversed — the person who is not on the mortgage is the one looking to get out of paying, and the person who is named on the mortgage is looking for a more legitimate way out.
That’s because, generally speaking, it’s the owner who is the borrower on the mortgage that actually stands to take a big old credit hit by virtue of defaulting on, or walking away from the home and the loan, not the titleholder who is not involved with the mortgage.
The mortgage company can hold responsible — via credit damage, deficiency judgments and collection actions — only the individual who actually agreed to repay the loan that is secured by the home. This is why we real estate practitioners often caution people against taking a loan on behalf of someone who is not going to be on the mortgage but who is agreeing to pay the mortgage, because if and when that person walks away from their agreement to pay, the mortgage bank will almost never pursue them or hold them liable.
Rather, they’ll be going after the individual who is on the mortgage. (On occasion, when a well-written legal agreement between the borrower/co-owner and the nonborrower/co-owner is broken by the nonborrower, the borrower/co-owner and/or the bank may be able to hold them liable.)
But that’s the opposite of your situation. It sounds like you’re just the type of individual whose modus operandi is to behave responsibly with respect to your commitments, whether it damages your credit or not. I have actually heard stories of a nonborrower/co-owner whose credit was impaired by a foreclosure, improperly, because of an error on the bank’s end.
Even though such folks are often able to get the derogatory credit information removed, that — and foreclosure in general — is an experience to avoid if at all possible.
So back to your question: Can you sell the place unilaterally? My answer? No. If your son is on the title, he’ll have to agree to any transfer of title. If you’re able to sell the property for more than is owed on it, all he’ll need to do is sign some papers. And not even too terribly many papers.
In fact, he could actually sign a single document to give you the power of attorney to sell the place without any further involvement from him, if signing the title papers is too much for him to do. Who knows, he might even get a few dollars out of it.
If, however, you have to pursue a short sale because the mortgage and other lien payoff amounts are greater than the property’s sale price, your son will have to engage quite a bit more in the short-sale application process.
He’ll have to provide a complete set of financial documentation (proof of his income, expenses, assets, bank statements, tax returns, etc.) and a hardship letter explaining to the bank any financial crises underlying his inability to continue meeting the mortgage obligations.
While this is much more work — especially if, as is common, the bank requests repeated submissions of updated information over a number of months — it’s generally in his best interest to make every effort to avoid the credit and possible legal/financial consequences of a foreclosure.
Encourage him to play ball and divest of the property in a responsible way rather than just walking away.
