(State of Oklahoma, USA)
Someone I know sold a house and held the mortgage personally. The buyers paid promptly for several years, but then developed several medical problems and are all on disability, not sufficient to afford the payments. The seller wants to give it to them and forget about it.
They asked me to find a form for them to have recorded. All the ones I have found explicitly state "paid in full" so there is a concern that one of their heirs (they are over 80 and one has dementia) might sue the buyers.
No doubt some are thinking the medical problems are a fiction to avoid collection, but they don't think so. Since the buyers paid promptly for a few years at first and since the sellers have visited them at the house, I don't think so either. However, just in case, I would feel better if there were also language preventing the buyers from suing the seller for damage that has occurred since the sale, that the buyers could not afford to repair.
The sellers don't want to pay a lawyer for it. Anyone know (1) whether the words "paid in full" are a risk to the buyer(s) when it can easily be proven false? and (2) a source for a release that is free or sample (or extremely low-cost) and has language to indemnify the seller(s) from any further obligation (including taxes)?
Also, as Ganesh hinted, taxes on the unpaid balance could result in the government giving the recipients more problems on top of the medical issues. Hmm, I'm tempted to call a lawyer and pay him myself to prepare something.
Update: Can the seller claim the amount not collected as a bad debt deduction?