I bought a home with my elderly parents. They reneged on their promise to sell their house and repay me. What now?
“The mortgage was approved solely on the basis of my income. I made the down payment and paid the closing costs.” (Photo subject is a model.) – Getty Images/iStockphoto
I think I made a huge mistake when I purchased a home with my elderly parents, and I have no idea what to do now. They have been struggling on Social Security for several years, but they always refused to provide specific information about their circumstances.
In the last couple years, they started to ask for financial assistance more frequently and in larger amounts. I realized it was worse than I thought when my mother asked me to pay off a credit-card balance of $15,000 because she could not pay the minimum amount due; she admitted that she had several other credit cards (likely maxed out) in addition to a mortgage and a home-equity loan.
They have approximately $350,000 of equity in their home. If they could access the equity and live in an area with a lower cost of living, they should be able to live comfortably. This past winter, they found several homes in my town that they liked, but they would not qualify for a loan without selling their house first.
So that they would not be under pressure for the move, and they could perform some repairs they thought were necessary before putting their own house on the market, I offered to buy the house with them.
The mortgage was approved solely on the basis of my income. I made the down payment and paid the closing costs. The agreement was that, as soon as they sold their home, they would refinance the mortgage and repay those amounts as well as some of the money I previously loaned them (although I have effectively written that off). I also offered to manage and pay for a number of cosmetic repairs to their new home, so that it would be move-in ready.
The closing was in June. Seven months later, their house is still not on the market, and my mother gets enraged when I ask about their plans. She will not tell me what repairs are pending or even when she plans to talk to a real-estate agent about listing the house.
They have continued to ask for help with their regular bills as well as some of the repairs to their home, for which I’ve given them about $40,000 since the closing; the ongoing work on the new home has cost another $50,000. I am also paying the monthly mortgage payment of $3,000 for the new house, in addition to my own.
Story Continues
I have a full-time position as in-house corporate counsel and I realize that I am financially well off compared to many, but my net monthly pay is approximately $11,000, and I cannot afford this much longer. I am rapidly going through my savings, and my own credit-card debt is skyrocketing. I lost several years of saving for retirement when I was on disability for my multiple autoimmune illnesses and, at 55, I don’t have a lot of time left to make up the shortfall. I’m scared about what will happen to all of us if my health worsens and I can’t work again.
I have tried rational discourse, begging, threatening, crying, etc., in my effort to have my parents understand the urgency of the situation, to no avail. It is clear that they do not have a realistic understanding of their finances and how this is impacting me. I thought about filing for conservatorship so I could take over the estate, sell their house, and get everything in order, but I don’t think they would ever talk to me again.
I would greatly appreciate your advice. Thank you so much for taking the time to read this.
The Daughter
You don’t say if you are an only child, but if you are, the likelihood is you will inherit it from your parents on a step-in basis when they both pass away. – MarketWatch illustration
Your parents’ behavior is out of your control. Given that you have bailed them out on multiple occasions before and have consistently racked up debt, I suspect their problems are more than financial. There’s a lot more going on beneath the surface. If you continue to try to pour money into their credit-card accounts and pay off their other debts, they will take you down with them. You’re 55 and you have a genuine fear about your future health. But you’re still young, you’re still earning money and you have an asset that is lying empty. It should at least be making some money, so your first option is to consider renting the property out for now until you can figure out your next steps.
If there are three of you on the deed to the house, are there also three people listed on the mortgage? Either way, your second choice is to sell the home if your parents do not honor their side of the agreement. That, of course, means you have to pay the real-estate agent’s commission, lawyer’s fees and other closing costs — so perhaps a combination of those two options could offset some of those funds. If your parents don’t agree — because they appear to not wish to comply or make life easier for anyone but themselves, if you would forgive my bluntness — you will need to file a partition action to force a sale. Talk to a real-estate lawyer about your two options.
The third option is to hang onto the house for as long as you can with a view to inheriting it. You don’t say if you are an only child, but if you are, the likelihood is you will inherit it from your parents on a step-in basis when they both pass away, meaning you would inherit your share at the fair market value of the house at the time of your last parent’s death and would not be taxed on the purchase price. It’s a lot of extra hassle for you, but it would help you get in and out of this real-estate transaction without losing money or, at the very least, minimizing your losses. You purchased this house when interest rates are still high, so you may also have an opportunity to refinance in the future.
The unspoken part of your story is your parents’ motivations and, to put it bluntly, their character. Many people run up debts because they simply can’t afford to pay the rent and groceries and their jobs, if they are fortunate enough to have one, simply don’t pay enough money. But your parents have reneged on their promise and greeted your inquiries with anger and defensiveness suggesting that, in addition to possible mental-health issues, they are unwilling or unable to do the right thing, for you or for themselves. And as long as they believe you are there to pick up the pieces, they will keep doing what they’re doing. In short, they don’t act in an honest way that takes other people into account.
You can file for conservatorship on financial grounds. “A conservatorship may be established after a relative, friend, or public official petitions the court for appointment of a conservator,” according to the Family Caregiver Alliance. “The petition must contain information on why the individual cannot manage his or her financial affairs or make appropriate decisions concerning his or her personal care. Once a petition is filed with the court, a court investigator is appointed to interview the proposed conservatee and to determine if the individual is truly incapacitated and whether appointment of a conservator is justified. The investigator reports back to the court with an opinion.”
You write that if you filed for conservatorship of your parents they would never speak to you again, but if the tables were turned and you failed to follow through on a real-estate deal and left your parents paying a mortgage on a home you had no intention of moving into, they would likely never talk to you again either. And yet that’s what they’ve done to you. It’s time to stop believing you are dealing with rational people — like a friend — and break the spell: You are being taken for a ride by two people who also happen to be your parents and, as hard as that may be to face, you have to take off the “kid” gloves, in every sense.
The Moneyist regrets he cannot reply to questions individually.
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