My mother turns 81 this year. For years, she and my sister have talked about building an annex in my sister’s house so that my mother can move in with her. My mother promised to pay for the bill.
Together they hired an architect and decided to start construction. I was not consulted on any of this. As the pandemic set in, my sister’s contractor told her that wood prices would go up, so she bought wood and started the project.
Of course, when she went to my mom for the money to fund the addition, my mom didn’t have it. So now my sister has a pile of wood on her lawn, and no money to pay the contractor.
““To complicate matters, my stepfather decided he wanted to stay in their house and not move to my sister’s house.”“
It would have been easy to finance all of this by selling my parents’ fully repaid house. But to complicate matters, my stepdad decided he wanted to stay in their house and not move to my sister’s house.
So we had the idea of ââtaking out a mortgage to buy my parents’ house. My parents would share the money from the sale. Half of my mother would go to finance the expansion of my sister’s house where my mother will live, and half of my stepfather would go to paying me rent at market rates so that he could stay in their house for a while. at least 15 years.
Unfortunately, I was not able to borrow as much as we needed. My parents lowered the price of the house below market value and donated equity to me so that I could qualify for the loan.
When we set up trust accounts to handle the proceeds of the sale, my mother’s trust got $ 350,000 to pay for the construction of my sister’s house extension, and my stepfather’s trust got received $ 41,000 – not even enough to pay off the mortgage, taxes and insurance for 17 months, let alone 15 years.
COVID has, of course, skyrocketed construction costs. My sister informed me that she did not have enough money left to finish building the extension for our mother. In his mind, because my parents’ house was valued at $ 800,000, my mother’s trust should earn $ 400,000 from the sale.
““My parents cut the price of the house below market value and gave me an equity gift so I could qualify.”“
In order to make up for this balance, I would have to give him the remaining $ 41,000 from my stepfather’s trust (leaving him with nothing to rent), plus $ 9,000 from my own pocket, then I should find the money for make the mortgage payments by myself.
I understand that my sister, through no fault of her fault, doesn’t have the money to complete the addition – but I have used every last chunk of my credit to finance the purchase of my parents’ house, and now I am faced with there is no proceeds to finance my stepfather’s rent.
We are fighting about this pretty hard, and it arouses a lot of resentment. My sister thinks I’m selfish because I got our parents’ house for a “song.” I feel resentful because I never wanted the house and limited myself financially so that the three of them could have what they wanted – and now I’m being asked to stretch even more.
There are arguments on both sides. My sister now gets all the money to invest in the house she owns, which will rise in value. I get all of the equity in the house from our parents which is a great long term investment but leaves me cash poor and struggling in the short term.
Both parents have retirement funds, but my mother will not contribute more to the construction project, and I don’t have the heart to charge my stepfather extra money for the rent while he has me. has already offered so much equity in the house.
How do you make that fair? Should I give my sister $ 50,000?
No good deed goes unpunished
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There was a lot of borrowing from Peter to pay Paul, but it seems Peter and Paul’s resources ran out, along with everyone else’s bank accounts. You all seem to have created a problem for yourselves and for each other. In fact, this addition was a solution to a problem that did not exist. There are so many keys in the works, you will run out of keys.
The original plan was flawed in that your sister – and now, ultimately, you – are faced with the task of housing your parents under two different roofs. You bend over backwards to help your parents, but your stepfather stays behind, and your mother’s finances have not supported this great project. The people you are trying to help are not fully participating in the process.
Before I give you a solution, I have a few observations: Your sister and your mother made this plan together. They the two need to take responsibility for it. Your stepfather refuses to cooperate with the plan. He has to live with it. You had the opportunity to help and, yes, to make some money, hopefully. You have to own it.
Your mother also saved a significant brokerage fee, 5-6% of the sale price, among other things, by selling you. This is even assuming that you are right about both the market value and the price a third party would be willing to pay. In addition, you are not responsible for the hasty financial decisions of your sister or your mother who broke a previous promise.
So where does that leave you? My solution, since there is one in all these real estate schemes, is to treat the $ 50,000 as a gift to you and your sister, and give her half of it ($ 25,000). You take the risk and the financial burden of owning this house, so any appreciation you have of it is fair game. But resist getting caught up in these financial family tragedies To infinity.
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