Parents possibly moving into my sister's house--how can we make it work?

Parent Cafe
1

My sister is moving and we would very much like my parents to move into her home. In the past have said they did not want to move, but they love her home and the two of us think IF we can figure out a way to make it easy, fair and secure for them they might go for it. I know my mom would be excited, Dad is the questionable one. It is a much better house for them–chefs kitchen for mom, plenty of shop and storage space for dad, all on one level, in a better neighborhood and closer to shopping and medical services they use. But we’re not sure how to proceed. Their home is only 10 miles from sister’s home, so the logistics are relatively easy, but I’m stumped on the financial part. Hoping for some advice. Details:

Sisters Home:
Value: 175K
Equity: 60K

Parents own their current home. Value $110K

I am willing to become part owner of home and have 70-80K to invest.

Parents also willing to be partial owners, but we only want to do joint ownership in halves–either sister and parents or sister and I.

Sister would like to get $40K in cash out of house to remodel new home.

Parents will not make payments or pay rent. They will take care of maintenance, taxes and insurance (so I guess that could be considered rent money ?)

Sister and I are willing to have a small monthly mortgage–$400-500ish (principal only)

If my parents and my sister end up being joint half owners, contract would need to be structured such that upon their deaths, sister and I would split their half of whatever equity there is.

Everything would be detailed in a contract, including stipulation that they could stay in home until they pass away or need or want to move.

They have frequently talked about transferring ownership of their current home to sister and I, so I know they would be up for the two of us being joint owners.

Everyone is financially secure and everyone has excellent credit. Sister and I have both borrowed money from parents in the past for down payments on various homes. Everything was in a contract and terms were structured to be a good deal for both parties, and everyone lived up to terms of contracts. So, there is a history here of everyone being dependable and trustworthy–no concerns there.

I know we need a lawyer to advise on the details and contract, but I’m curious about possible realistic scenarios.

Ideas? Advice?

2

Is your sister going to live there too, or it’s a home she is moving out of?

3

Nope…she owns the home, but is getting married and moving into a other home.

4

You might want to talk to an elder law attorney about possible effects on this arrangement of either or both your parents ever going on Medicaid.

5

So…your sister currently owes $115,000 on her home. Is that right?

Your parents have a home that is worth $110,000…when you sell it. Does that include subtracting closing costs, etc?

It sounds like your sister needs $115,000 plus an additional $40,000 so she can pay off this house AND remodel her new home. How will that happen?

if your parents put the full profit from their current home towards the sister’s house, that still leaves a little shortfall, right?

I think this sounds confusing!

6

$110K is estimated net proceeds.

sister owes $100K on her home; only needs $40K in cash–could be from me; parents or refi; not $115K

If my parents sell their home, and give her $87K, effectively buying 1/2 ownership, could she keep her current mortgage and quit claim 1/2 ownership to them? Or something similar?

7

There are too many unknowns. Assuming no mortgage on the parents’ home, we don’t know what it will actually sell for till it sells. Assuming the sister owes $115,00 to the bank, we still don’t know what that house will sell for.

Those two figures are pretty important.

I am not an economist or financial planner. I have sold my own houses and settled too many estates.

I think one way to do this, if the numbers would work, is for the parents to sell their house and then use that cash (and maybe other cash they have) to buy sister’s house. Then the house goes to the two of you when they pass away. Alternatively, if they need cash, they have you and sister buy the house from them until the point you inherit the house equally.

I am assuming only your parents have enough assets to buy this house without a mortgage. I am assuming your parents are mortgage free and want to remain mortgage free.

edit: crossposted

8

Seems like you guys are making this far more complicated than necessary. If everyone is financially secure, why not have the parents buy it outright, with no realtors fees?

9

I would leave them in the home they are in now. They said they don’t want to move, and they own it outright. I’d respect their wishes. Buying, selling, and moving is a HUGE hassle.

10

^and no mortgage interest.

11

Tbat woukd obviously be the easiest thing to do, but my parents woukd never go for it if they have to fork over more money for a home. And my sister likes te idea of keeping at least partial ownership of it for investment purposes.

12

It is going to make estate stuff more complicated. Maybe it’s worth it to you. It would not be to me at this point in my life.

okay - split the ownership three ways. Then you and sister inherit parents’ ownership equally.

There are no other siblings, right?

13

Alh…actually all if us have enough investments to own/buy the house outright…especially if we are talking only about halves. But at 3 1/2 percent interest, plus possible tax write off why would sister and I do that?

Parents are financially very secure, and their house is paid off, but they absolutely would not invest more into this or any other house. It doesn’t sound like it because of the low values but these houses are both in excellent condition. Both have been upgraded and or remodeled in the last 5 years. My parents are just very simple and frugal people and are comfortable in their home. They are only going to do this if we can make it easy on them financially and logistically. They’ve already been pestering my sister and I for 5 years to take ownership of their current home for estate/inheritance purposes.

And my parents live in a neighborhood with other houses that have the exact same floor plan as them on the same street, with a couple of recent sales, so we are very confident about the estimated values here. If anything the estimate on their home value is low.

They are in fantastic health in every way. There is no “leaving” or “putting” them anywhere. They love her house, and mom would like to move into it. They have told my sister many times she would be stupid to sell her current home. Even though they’ve said in the past they didn’t want to move, moving into this home was not an option then. We think, because this we might be able to make this easy on them (no deadlines, or hassles to move on any particular schedule), they might go for it. We’d like to figure a possible scenario that would make it both easy and fair and make a serious proposal to them. Given a few months to think about it, we think even Dad might really warm up to the idea.

14

PS…husband and I already own investment property and are currently shopping for another rental home. Being part owners in this house would be a slam dunk for us and solve my parents desire to transfer ownership of their home to sister and I. We all know there is a medicare lookback period that would be involved and that is OK.

15

Is there a reason for you and your sister not to own the house jointly, and your parents just live there? Paying utilities and the other things you mentioned upthread?

Can your parents just put the money they make off their house sale in the bank?

Last week I wrote the last checks, closing the last estate account, for the last estate I’m going to have to deal with. Talk to a lawyer. Make this easy on yourselves. jmho.

16

^We’re nice. But not that nice. :slight_smile: Not giving them a free place to live, nor would they let us.

17

Unless they spend the house proceeds, you get it in the end.

You already said they want to gift you the house. Take the gift now and let them live rent free in sister’s house which you and sister now own in common. Does that work?

I believe in getting professional advice and I’m not a professional. I’m just speculating.

One of the estates I had to settle, the deceased had a life interest in a house but was supposed to do maintenance, which never happened. There were several lawyers and a lot of bad feelings before it was all resolved. It would have been so much easier, for his heirs, if he had just bought a place. So I’m probably just projecting here. And I’m totally off topic. sorry.

18

^So, they gift each of us 55K, I give my half to sis and become a 1/3 owner. Can sister quit claim a fractional ownership to me? Does she have to refi as part of that process?

19

Aren’t you triggering taxes? You can’t just gift large sums of money to people.

20

I am pretty sure you can if it is equal amounts to heirs. This came up in another estate with which I was involved. No one paid taxes on the gifts. It may have been unique to that estate though.

You need a lawyer. :slight_smile: