Selling a home with a personal lender mortgage

[Robert Jones]

Jurisdiction

Pennsylvania

I purchased a second home earlier this year with the intention of selling the first. Because it happened quickly and I could not secure credit fast enough I set up a mortgage with a friend.

With the bubble burst I've arranged to sell the second home. The buyer wants a simple agreement of sale and he's arranging a title search.

I would prefer to keep the mortgage issue a private matter. The friend is aware of the sale, and that I'm going to pay him in full the day of closing.

My question is if I need to disclose the mortgage to the buyer at AoS or at closing. I asked the lawyer who handled my closing and his response was, "Typically, your buyer would get title insurance and the mortgage would be paid at closing. If he is purchasing without title insurance, he is making a huge mistake, but that would be his problem.
I hope that helps."
It didn't help. I'm assuming that means, "pay me or I don't answer questions."

Can I proceed with the Aos and closing, then pay the mortgage holder, and without having to disclose that to the buyer?

Thank you.

 

[zddoodah]

I would prefer to keep the mortgage issue a private matter.

What does this mean? If a mortgage exists, it's already a matter of public record.

I asked the lawyer who handled my closing and his response was, "[Response]. I hope that helps."
It didn't help.

So...get on the phone and ask for further explanation.

 

[Zigner]

What does this mean? If a mortgage exists, it's already a matter of public record.

It sounds more like his buddy loaned him the money and he's going to pay back the loan using proceeds from the sale of the house. I seriously doubt this was recorded as a lien/mortgage.

 

[Robert Jones]

What does this mean? If a mortgage exists, it's already a matter of public record.

It does, and so apparently that ship has sailed. I didn't know if that was a matter of record, having been signed privately, handled by the lawyer.

I'm assuming this is what the lawyer meant, indicating the title search would reveal that.

So...get on the phone and ask for further explanation.

Clearly I'm going to have to. His response wasn't useful. If the answer is billable all he has to do is say that. Rather than wait for his next reply I thought I'd ask here.

I seriously doubt this was recorded as a lien/mortgage.

I had the lawyer draw it up and "the bank" was present and signed off at my closing.
The terms were to cover the interest each month until the sale of house 1 and full payment, or at the end of one year house 2 goes into his possession.

Forgive my complete ignorance - why I'm posting here. I'm assuming that this means when my buyer does a title search he'll get a hit that I owe a mortgage on the house. Does this prevent the closing? Do I need to secure some documentation from my (or another, because this one stopped communicating efficiently) lawyer to make sure the sale can complete?
I'm looking for the fastest, easiest way to end this.

And thank you both for your replies.

 

[zddoodah]

Let me try and break this down. You wrote that you "set up a mortgage with a friend."

That would normally entail you signing two documents: (1) a promissory note; and (2) a mortgage. They could be combined into a single document. The mortgage would then be filed/recorded at the county clerk/recorder. This would make the mortgage a matter of public record and would ensure that anyone who took title following you would do so subject to the mortgage.

Is that what happened in your situation? I don't know. You'd have to tell us.

It's certainly possible, as "Zigner" speculated, that the mortgage didn't actually get recorded. If you're not sure about this, you need to figure it out because your buyer will likely expect a warranty deed, which means you will be warranting that you're conveying clear title. If the mortgage actually got recorded, you'll need to have a release/reconveyance of the mortgage or you're not going to close. If the mortgage didn't get recorded and you don't pay it off after the sale (I know...you'd never do that...), then there are a number of issues that could come up.

Don't be penny wise and pound foolish here. Consult with the appropriate local professionals who have all the facts.

 

[adjusterjack]

I'm looking for the fastest, easiest way to end this.

That would be to call up the people at the title/escrow company or whatever entity will be handling the transaction and provide written instructions that a loan in the amount of $____ has to be paid off at closing. They will prepare a payoff release for your friend to sign for the closing.

Easy peasey. These people do this stuff every day.

 

[Robert Jones]

Easy peasey. These people do this stuff every day.

Thank you very much for the simple to understand answer and kind demeanor offering it.

There was a lot I didn't understand with all of this, thinking initially that I wasn't going to need to. These answers, some research, and some conversations today and I think I have it all down.

All the answers above are appreciated.