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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4545
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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My husband and I are California residents. We are looking to

Customer Question

My husband and I are California residents. We are looking to purchase some property in Hawaii using the proceeds from a rental property in California we are selling. The Hawaii property belongs to my husband's aunt, so she is willing to carry half of her asking price. The problem is that my credit is not very good, so we would like to purchase the property with what I believe is called Purchase money mortgage. How much would it cost to prepare this document, and since the property we are selling is my name only, is a 1031 the best tax protection option?
JA: It's only $5.
Customer: That's fine
JA: Because real estate law varies from place to place, can you tell me what state this is in?
Customer: The property we are selling is in California. We are California residents. The property we intend to buy is located in Hawaii.
JA: Has anything been filed or reported?
Customer: No, we are seeking this advice before signing the purchase contract, which is awaiting our electronic signature.
JA: Anything else you want the lawyer to know before I connect you?
Customer: The main question we have is would a 1031 be the best option, or should we do a purchase money agreement, since our family member is personally carrying the balance. Also, if we do the purchase money agreement, would we be eligible to get an equity line of credit on the property since she will still be carrying the balance? This is a concern because the property is in need of repairs
Submitted: 1 year ago.
Category: Finance
Customer: replied 1 year ago.
Would we need to get the purchase money mortgage drafted by a lawyer? If so, a real estate attorney or a tax attorney?
Expert:  Rakhi Vasavada replied 1 year ago.

Dear Friend,

Hello and welcome. Thank you for providing an opportunity to assist you.

From what I understand from your question, I believe, even if you go for money purchase agreement, 1031 exchange would still be possible.

In a 1031 exchange, real and personal property earnest money deposits, extension or option payments are recognized as an act of good faith of the Buyer’s intent to acquire the subject property. Following guidelines is especially important in a 1031 exchange so as not to violate the g(6) limitations of constructive receipt of the Internal Revenue Code Section 1.1031.

HAVING said this -- I understand that you also require a home improvement has well. YES -- This may be possible as well. You have the same options for a home-improvement loan with an owner-financed house that you would have with a conventional mortgage. You can get a personal loan, obtain a home equity line of credit or get a home equity loan. You'll just have to prove your right of ownership and demonstrate your equity or interest in the house. In some cases you may have to get consent of the person who is financing you. Note that you make sure to mention in your contract that you have right to carry on improvements.

I am sure this would help.

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Warm Regards,