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Posted by MichaelJ on June 12, 2008, 7:07 pm
Hi All,
This may be the wrong group for this question but I'm sure all of you
know more about this than I.
Mom wants to sell the house, it's worth $230-250k, to her Nephew. It
is paid off. We (Mom's kids) would love to see the Nephew own the
house vs a stranger but he can only afford about $130k at this point.
Are there smart strategies to make this happen and have him take a
mortgage for that amount ($130) and then owe the remainder to be paid
at a much later date? (If I'm making sense). Mom would like to
ultimately get at least $200 for it to be split among us 4 kids. This
is in Pennsylvania if that makes a difference.
Thanks in advance for any ideas or a pointer to the correct group,
Mike
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Posted by joetaxpayer on June 12, 2008, 7:24 pm
MichaelJ wrote:
> Hi All,
>
> This may be the wrong group for this question but I'm sure all of you
> know more about this than I.
>
> Mom wants to sell the house, it's worth $230-250k, to her Nephew. It
> is paid off. We (Mom's kids) would love to see the Nephew own the
> house vs a stranger but he can only afford about $130k at this point.
> Are there smart strategies to make this happen and have him take a
> mortgage for that amount ($130) and then owe the remainder to be paid
> at a much later date? (If I'm making sense). Mom would like to
> ultimately get at least $200 for it to be split among us 4 kids. This
> is in Pennsylvania if that makes a difference.
First, it's worth 230-250, but she ultimately only wants 200? Why is
that? If she can get 240, even after commission, she nets more than 225.
Given the mess the banks are in, they may shy away from any deal that
doesn't actually have cash down, but if I were the local banker, I'd be
happy to write a note for 130 vs a value of 200+. Seller backed
financing on a second note was common, and in fact, takes some risk off
the bank, but that really depends on the bank itself.
How will she want the balance paid? Lump sum in X years? A note that has
no payments and then kicks in in X years? At what rate? What makes
anyone think the nephew will be able to make any payments when they are
due against this second note? 'Smart' is to do it all on the record, use
a lawyer, get it in writing. This means recording the second lien.
And it means that in 10 years when he cannot make any payments being
willing to foreclose, or not. But if not, then what?
Joe
www.blog.joetaxpayer.com
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Posted by Don on June 12, 2008, 8:03 pm
> Mom wants to sell the house, it's worth $230-250k, to her Nephew. It
> is paid off. We (Mom's kids) would love to see the Nephew own the
> house vs a stranger but he can only afford about $130k at this point.
> Are there smart strategies to make this happen and have him take a
> mortgage for that amount ($130) and then owe the remainder to be paid
> at a much later date? (If I'm making sense). Mom would like to
> ultimately get at least $200 for it to be split among us 4 kids. This
> is in Pennsylvania if that makes a difference.
The unfortunate truth is that business deals like this among friends
and/or relatives are very risky. One saying goes: "When you do business
with friends you lose both your friends and your money." By the same
token a deal could go sour and result in ill-feeling among relatives
for years to come. How many people would be willing to foreclose on a
close friend or a nephew? If you did foreclose, how many friends or
nephews would take it is stride without ill feeling? My guess is not
too many.
lf I were in your position I would talk to mom about the possibility to
selling the house to some nice person who would treat the placet well
and then find some other way to delight and please that wonderful
nephew.
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
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Posted by Sandra Loosemore on June 12, 2008, 11:00 pm
> Mom wants to sell the house, it's worth $230-250k, to her Nephew. It
> is paid off. We (Mom's kids) would love to see the Nephew own the
> house vs a stranger but he can only afford about $130k at this point.
> Are there smart strategies to make this happen and have him take a
> mortgage for that amount ($130) and then owe the remainder to be paid
> at a much later date? (If I'm making sense). Mom would like to
> ultimately get at least $200 for it to be split among us 4 kids. This
> is in Pennsylvania if that makes a difference.
>
> Thanks in advance for any ideas or a pointer to the correct group,
It's not clear to me exactly what the situation is -- does Mom need to
raise money, does she want to/need to move, or does she just want to
do something nice for Nephew? Is $130K the most that a bank would lend
Nephew, or is it the utmost limit of his resources?
If Nephew really wants this particular house, could he afford to buy
it at something closer to its market value by getting a roommate or
two to pay rent? Is it an option for Nephew to rent the home from Mom
instead of buy it? Like others who've already posted, I'd be really
leery of any kind of interest-free loan, etc, because of the bad
feelings it would cause in the family Nephew can't pay the mortgage
and Mom and her heirs are left holding the bag.
-Sandra the cynic
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Posted by Douglas Johnson on June 13, 2008, 12:17 pm
>Mom wants to sell the house, it's worth $230-250k, to her Nephew. It
>is paid off. We (Mom's kids) would love to see the Nephew own the
>house vs a stranger but he can only afford about $130k at this point.
As others have said, this puts both family and finances at risk. One additional
thought is that a $250,000 house will cost $12,000 to $15,000 a year to insure,
pay taxes, utilities, and maintain. Can nephew afford that, too?
-- Doug
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Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
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