We are selling our house to a relative without agents on either side. The bank is now requiring a credit check on us (the sellers) to complete the transaction. Their best explanation is that they need to make sure our mortgage is up to date, but they will not accept our mortgage company telling them that. Why would they require us to have a credit check done? What happens if we refuse?|||They need to know if you are on the brink of bankruptcy for one thing. The second thing is this is not an "arms length sale" since it is within the family. Banks and the IRS are very careful about these kinds of arrangements. If you truly want to sell then you have to comply with the bank's requirement and also be ready to answer any questions by the IRS in the event they suspect this sale is an effort to avoid taxes.
You should have an appraisal on hand and good documentation of all the facts. If you have capital gains on this sale make sure beforehand that you will qualify for the exemption on the sale of your main home. The IRS could disallow the exemption.|||if you refuse the loan probably does not get approved. That is a very odd request from buyer's lender. but lender's are changing rules daily these days so this could be a trend.
Also fact that buyer is related to you probably raises a red flag to their lender that this is not an arms length transaction.|||Probably passing a check for outstanding liens and judgements.
My guess is that if you refuse, the lender will toss out the loan application as failing to meet underwriting guidelines.
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