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I bought a property that has elderly tenants on it. They want to stay, but they can not afford to pay fair market value. For a bevy of reasons beyond the scope of this post, I don't want to be a landlord, and they want to be the owners.

Can I sell them, as joint tenants, a life estate in the property? I was thinking of charging them significantly less for the life estate, because I would get the property back after their deaths.

If I seller-finance them the life estate (through a deed of trust), can I foreclose if they fail to pay as agreed? If I do that, do I have full fee title to the property?

If upon their deaths they have not paid off the deed of trust, do I have to hold a trustee's sale to extinguish it, or can I just release the deed of trust and forgive the balance?

What else should I know about selling a life estate? I'm looking for general discussion here, not specific advice. I will hire a lawyer before actually doing anything.

  • I'm sure you can sell them the estate for a specific term. I've seen contracts written that way. I don't know specifically about the other terms. Time to hire a lawyer; I think what you're asking for is reasonable but it will require legal expertise to draw up the contract properly. – markspace Jun 25 '17 at 23:58
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    Thanks, I'm going to hire a lawyer, but I'm trying to get a bunch of ideas first, then research them, so I can ask the lawyer useful questions and have context to interpret his advice. – Diogenes Creosote Jun 26 '17 at 0:06
  • I don't know where you live, but in WA, I have set up a rent-to-own agreement with the current tenants of my home, which absolves me from landlord duties. You may get an agreement along those lines, but it may require a definite sale date to be enforceable. – SeanC Jun 26 '17 at 16:46
  • Watch out for the medicare/medical cost-recovery provisions even on a life estate: canhr.org/factsheets/medi-cal_fs/html/… – mkennedy Jun 26 '17 at 19:51

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