Author Topic: Strange home buying possibility... Advisable?  (Read 5375 times)

homeymomma

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Strange home buying possibility... Advisable?
« on: February 27, 2016, 08:57:51 PM »
My family of 4 is currently living in a family home.

The house we live in is co-owned by parents who are divorced. The father would consider gifting us his half outright (he hasn't lived here in many years). If that were to happen, we could ostensibly take out a mortgage for the remaining half and buy it from the mother.

The relationships are quite complex and not great, and there is a lot of material stuff in the house that would be a big stumbling block in any change of ownership.

But just looking at it financially, it would be hard for us to pull off. We'd have to reduce what we put toward retirement to afford to buy the house. It also is in very, very bad shape with 30 years of deferred maintenance that has piled up. We would have used all our savings to take on the mortgage, and would be caught unprepared if anything major happened.

I basically see it as a (huge) gift, but one that would only be realized after we sold the house. Is that accurate?

Thanks for any help!
« Last Edit: February 27, 2016, 09:15:36 PM by homeymomma »

MBot

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Re: Strange home buying possibility... Advisable?
« Reply #1 on: February 27, 2016, 09:20:35 PM »
Two totally separate issues:

1. Relationships. Can you live with a complicated family situation? What would happen if you "cashed in" the gift by selling the house? How long would you be locked into livin there?

2. Money. Can you get a "mortgage plus improvements" or other financing to do the improbements? Essentially you'd have a house with half the equity in it - so you can draw on that for repairs, etc. Normally reducing retirement contributions to buy a house is bad, but 400k? That's a massive chunk of change.

Money isn't the issue here - you'd be getting a massive gift. Relationally is where you'd have to ask if its worth it.

Mongoose

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Re: Strange home buying possibility... Advisable?
« Reply #2 on: February 27, 2016, 09:25:47 PM »
It sounds like you are very apprehensive about this possibility. Personally in your situation, I would not be comfortable with the material stuff in the house possibility complicating what you describe as not great relationships. Also, houses need regular maintenance and 30 years is a long time to put that off. How bad of shape is it in? As described, it sounds like a potential financial nightmare rather than a gift. Would you purchase the house as is under other conditions (for instance, if you were actively house hunting)?


homeymomma

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Re: Strange home buying possibility... Advisable?
« Reply #3 on: February 27, 2016, 10:28:33 PM »
It needs a LOT of very expensive repairs. Off the top of my head: structural issues under the kitchen floor, kitchen floor after water damage and structural sagging, every single window needs replacing, basement needs to repaired (everything ripped out and replaced) after sewer flooding years ago. And of course every major appliance is 15+ years old and on its last legs. (Furnace, water heater, washer/dryer, AC)
It's a much bigger house than we'd normally shop for. It's 5 bedrooms and comes with insane utility costs because it's so poorly insulated. We hope to have 4kids, but only have 2 right now so it seems insanely huge.
However, it's in an extremely desirable neighborhood with some of the very best schools in the nation.

In terms of how long we'd feel obligated to stay, I dont really know. We definitely couldn't just turn right around and sell it immediately, but we wouldn't necessarily have to stay forever.

The mother is a hoarder and all her things are in the house, even though she currently lives elsewhere. It would be a very tricky subject to even broach with her, much less the actual act of clearing things out, if we even got that far. Our family of 4 only has access to 1 bedroom out of the 5, if that gives any idea of how full the house is :)

Frankies Girl

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Re: Strange home buying possibility... Advisable?
« Reply #4 on: February 28, 2016, 12:02:39 AM »
It needs a LOT of very expensive repairs. Off the top of my head: structural issues under the kitchen floor, kitchen floor after water damage and structural sagging, every single window needs replacing, basement needs to repaired (everything ripped out and replaced) after sewer flooding years ago. And of course every major appliance is 15+ years old and on its last legs. (Furnace, water heater, washer/dryer, AC)
It's a much bigger house than we'd normally shop for. It's 5 bedrooms and comes with insane utility costs because it's so poorly insulated. We hope to have 4kids, but only have 2 right now so it seems insanely huge.
However, it's in an extremely desirable neighborhood with some of the very best schools in the nation.

In terms of how long we'd feel obligated to stay, I dont really know. We definitely couldn't just turn right around and sell it immediately, but we wouldn't necessarily have to stay forever.

The mother is a hoarder and all her things are in the house, even though she currently lives elsewhere. It would be a very tricky subject to even broach with her, much less the actual act of clearing things out, if we even got that far. Our family of 4 only has access to 1 bedroom out of the 5, if that gives any idea of how full the house is :)

First off, I've got two parents that were/are hoarders, so I am speaking from my experience here. No way in hell would I want to purchase a hoarder house since they always end up with extensive neglect and maintenance/structural issues, but then again, I would not choose to live with another person's things in my living areas at all. This is crazypants to me. So no, the house sounds like a horrible, terrible thing and I can't imagine why you're living there at all, much less even entertaining the idea of purchasing it.

Are you currently paying rent? Because I'd not be willing to do that with the limited access/living with hoarder stuff and horrible structural/cosmetic issues you describe. You have 2 kids and only have one bedroom actually usable? That's awful. And if you don't like the house and don't want to make all of those repairs, there's your answer. Get out now, find a great apartment or house in the general area and leave the parents to clean that mess up since they made it.

Do you really like the house and feel competent to take on all the repairs and upkeep it will require? Then I'd offer a ridiculously low offer on the house to buy it out from the mother. Of course, this is if the offer for the father to gift the other half to you stands, but be aware that you need to check int taxes or other complications - I know you need to live in the house a minimum of two years before selling to avoid the cap gains tax hit (like if the parents purchased the house at $100K, and it's now worth $400K, you'd be assessed $300K worth of cap gains if you tried to sell before living there 2 years - ouch).

So say the house would be worth $400K if it was in decent shape. You get a realtor out to run comps and an independent inspector to give you the breakdown on all the things that need to be fixed or updated to make the house match the rest of the neighborhood. Ballpark the repair costs.

Your dad gifts his half to you, and you offer the mom say $70K since it's going to take a ton of money to fix the things that need fixing and update the house to not be a scary nightmare place, as mostly it would be flippers that would expect to underbid to that level on that house anyway. I would make sure to have a complete inspection and estimates carefully listed out and noted for her so she sees that the house is really not sellable to anyone without these things fixed, and how much it will cost so she understands she is not going to get anywhere near what she thinks it might be worth and just tell her that's what you'd be able to afford since the repairs would be so extensive. She is welcome to consult a realtor if she thinks the house comps might be off.

Side note: Why if the parents are divorced do they still own the property? They should have either hashed out who keeps the house (one person should have bought out the other) or they should have sold it when divorcing. Your father can probably force the sale of the house if you don't want it since he should not be made to share joint property with an ex at this point (there's all kinds of liability issues when spouses/exes are still tied together like this). I'd suggest he consult an lawyer to untangle himself from his ex-wife at the minimum if you don't plan to purchase the house.

And finally, about dealing with the hoarder crap stored in the house. If you do purchase it, then give her until the closing to make arrangements to remove all of her property. It should be written into the purchase agreement that any property left in the house after closing is the new owners' property and you can use/dispose of it as you wish. If she wants to keep it, then she comes and gets it; it really is that simple. And if she gets angry, then let her; you are an adult and can tell her that she's had plenty of notice, and it's unfair to expect you to act as her personal warehouse - there are tons of storage units out there if her current house is too crowded. But you should not let her sickness hold your own space hostage. She can't ground you or take away your television privileges anymore, so if she gets angry, let her. And leave or hang up the phone if she won't stop harassing you over it - distance is sometimes a needed and necessary thing to enforce proper boundaries. It is healthy to have boundaries when dealing with your parents as an adult; do not be afraid to stand up for yourself and your spouse/children and don't be manipulated or guilted into doing things you don't want to do or putting up with crazy-making behavior just because they are faaaaaamily.

BTDretire

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Re: Strange home buying possibility... Advisable?
« Reply #5 on: February 28, 2016, 07:06:56 AM »
I don't see where you ever put a value on the property.
Is it worth the $400k that I see in others posts?
 There are two things to consider, financial and then the family thing.
Let's say it is a $400k house but needs $100k in repairs.
 So you have a $150k gift from Dad, but Mom still needs $150k.
Can you really find a bank to give you a mortgage to pay mom plus repairs, $250k?
 That will cost you $1200 a month plus taxes.
You need to find your own numbers, to work with.

 Family, you need to get all of mom's stuff out before closing,
or include what you are keeping in the purchase contract.
 Get her to rent a storage unit to move all her stuff into.
Do not leave any of her stuff in the house, if you do, it will never be your home.
 Good Luck.

tipster350

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Re: Strange home buying possibility... Advisable?
« Reply #6 on: February 28, 2016, 07:26:44 AM »
I would run, not walk from that property. In this case, a good decision is not just purely financial. Up and out. Let the divorced parents figure out what to do with their asset, and extricate yourself from that very messy situation that will only lead to a great deal of stress.

MsPeacock

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Re: Strange home buying possibility... Advisable?
« Reply #7 on: February 28, 2016, 07:59:07 AM »
Don't buy the house.

1. You state it would take all your savings and create financial hardship. Beyond this it doesn't matter, as this is the key factor.

2. It is 80% full of garbage, which will cause enormous arguments if your attempt to get rid of it. Even if it were financially viable to purchase the house you absolutely should not do so until ALL junk is removed.

3. Thirty years of neglect and extensive expensive damage. No. Particularly because even purchasing the house would be a financial stretch.

4. Complicated relationships and emotional issues. This is a lousy gift from your Dad, to be honest. He wants to get away from ownership and likely knows realistically that your mother will either never consent to selling the house and removing her junk, or that it will be absolutely impossible to sell in its current condition. Giving it to you is only a good deal to him. It transfers an expensive unsolvable problem from him to you. If he really wants to help you he can gift you proceeds from selling the house.

5 most hoarder houses have to be torn down, or 90% torn down. It isn't just a matter of fixing a few thing. Usually only a builder will buy houses in this condition.

6. Go rent an apartment. This is a horrible situation for your children. You will have emotional distance from the relationship and physical junk. Get a nice clean affordable apartment and save for a down payment on a good house for your family.
« Last Edit: February 28, 2016, 08:00:52 AM by MsPeacock »

Cassie

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Re: Strange home buying possibility... Advisable?
« Reply #8 on: February 28, 2016, 12:04:07 PM »
Sometimes when a house is in terrible condition you can buy it for cash very cheaply. WE did that with a foreclosure. Nobody could get a loan so the bank had to lower the price enough so someone would buy it and fix it.  Have a realtor come and tell you what it would sell for and if your hubby is not handy then get estimates for repairs and decide for yourself if it is a good idea or not.

RetiredAt63

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Re: Strange home buying possibility... Advisable?
« Reply #9 on: February 28, 2016, 02:02:41 PM »
http://brickhouse319.com/ is a blog detailing the experiences of a couple who bought a hoarder house.  Go back to the beginning, (the earliest the archives give me is http://brickhouse319.com/2015/04/) the story of everything that was in the house and yard, and the work they had to do, is harrowing. They were not dealing with family members, and they had no children.  And the husband is at least as handy around house renovation as MMM is.

Don't buy the house.

5. most hoarder houses have to be torn down, or 90% torn down. It isn't just a matter of fixing a few thing. Usually only a builder will buy houses in this condition.


mountainstache7

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Re: Strange home buying possibility... Advisable?
« Reply #10 on: February 28, 2016, 02:55:45 PM »
Doesn't sound like it's worth all the trouble that would accompany the purchase.

ShoulderThingThatGoesUp

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Re: Strange home buying possibility... Advisable?
« Reply #11 on: February 28, 2016, 02:56:39 PM »
You shouldn't be living there in the first place, much less buying it.

lizzzi

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Re: Strange home buying possibility... Advisable?
« Reply #12 on: February 28, 2016, 05:13:43 PM »
Yeah, exit stage left. I agree with all the posters above. Get your family out of there and find your own decent place.

homeymomma

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Re: Strange home buying possibility... Advisable?
« Reply #13 on: March 12, 2016, 08:44:17 AM »
I don't see where you ever put a value on the property.
Is it worth the $400k that I see in others posts?
 There are two things to consider, financial and then the family thing.
Let's say it is a $400k house but needs $100k in repairs.
 So you have a $150k gift from Dad, but Mom still needs $150k.
Can you really find a bank to give you a mortgage to pay mom plus repairs, $250k?
 That will cost you $1200 a month plus taxes.
You need to find your own numbers, to work with.

 Family, you need to get all of mom's stuff out before closing,
or include what you are keeping in the purchase contract.
 Get her to rent a storage unit to move all her stuff into.
Do not leave any of her stuff in the house, if you do, it will never be your home.
 Good Luck.

It's actually valued at over 900K on Zillow right now. Obviously it would be significantly less than that because of all the repairs needed. It's 5 bedrooms and the utility costs are horrendous because it's so poorly insulted. I think we will heed everyone's advice and stay out of it. We need to stay about another year to save up more for a down payment (no, we don't pay rent) then hopefully we can leave this high COL area all together!! Thank you so much to everyone for their thoughts. It's nice to be reminded that the best decisions are not always based on the $$. :)

dess1313

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Re: Strange home buying possibility... Advisable?
« Reply #14 on: March 12, 2016, 11:26:57 PM »
It needs a LOT of very expensive repairs. Off the top of my head: structural issues under the kitchen floor, kitchen floor after water damage and structural sagging, every single window needs replacing, basement needs to repaired (everything ripped out and replaced) after sewer flooding years ago. And of course every major appliance is 15+ years old and on its last legs. (Furnace, water heater, washer/dryer, AC)
It's a much bigger house than we'd normally shop for. It's 5 bedrooms and comes with insane utility costs because it's so poorly insulated. We hope to have 4kids, but only have 2 right now so it seems insanely huge.
However, it's in an extremely desirable neighborhood with some of the very best schools in the nation.

In terms of how long we'd feel obligated to stay, I dont really know. We definitely couldn't just turn right around and sell it immediately, but we wouldn't necessarily have to stay forever.

The mother is a hoarder and all her things are in the house, even though she currently lives elsewhere. It would be a very tricky subject to even broach with her, much less the actual act of clearing things out, if we even got that far. Our family of 4 only has access to 1 bedroom out of the 5, if that gives any idea of how full the house is :)

Run.  Seriously.  Run.
Paint and carpet are easy things to fix.  sagging floors, water damage are all huge red flags.   You need more than just a bedroom available for that size of family you have now, as well as your planned family expansion. Also with that level of hoarding it sounds like you could easily uncover other structural issues.  there have been some houses that there is so much weight from the objects it breaks the floor beams.

Villanelle

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Re: Strange home buying possibility... Advisable?
« Reply #15 on: March 12, 2016, 11:54:29 PM »
Would mom selling to you at true market value (or her half of TMV), based on the actual condition of the home?

I'd be concerned that she's not going to be realistic about the true value of the house, in addition to concerns about dealing with her hoard.  If you can get out a good inspector (and perhaps some specialists as well), and if your mom would be willing to give you a fair price (like, what an outside would pay, or perhaps even less since she wouldn't have to pay commissions), then it might be worth considering, especially if you are handy and willing to do some of the work. Obviously it doesn't all need to be completed tomorrow, since you are living there now as it is.  Under those conditions, and if you can afford the major repairs, it *might* be worth considering.  (Also of note might be the tax considerations if your dad gifts you his half of a ~$600k house, which is just a guess based on the $900k Zillow number and what you say about the condition.)

That said, I'd probably walk.  Your dad and mom are going to have a hell of a time selling it when you move out, but that's not your problem.


zolotiyeruki

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Re: Strange home buying possibility... Advisable?
« Reply #16 on: March 13, 2016, 09:51:07 AM »
Would mom sell to you at true market value (or her half of TMV), based on the actual condition of the home?

...

That said, I'd probably walk.  Your dad and mom are going to have a hell of a time selling it when you move out, but that's not your problem.
This is what'd I'd recommend as well.  Qmavam is right--you need to run the numbers to see if you can afford (or even *get*) a mortgage for your mom's half + repairs.  And even then, if it's more house than you need, you'll be paying the mortage and taxes and insurance on a house that you don't need.

If I were in the situation, I'd want to sorta flip it: buy it, with the understanding that 1) your parents need to get their stuff out immediately, and 2) you'll be moving out in three years.  Fix it up, stay long enough to avoid the capital gains taxes, and then sell it.  If that's not acceptable to the parents, I'd walk.

Daleth

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Re: Strange home buying possibility... Advisable?
« Reply #17 on: March 13, 2016, 11:37:23 AM »
On top of everyone else's advice, I just want to point out that there's no such thing as "just" giving someone something that's worth $150k. Even between family members there are probably tax consequences, possibly for both the giver and the recipient. To avoid them or as much of them as you can, you would need to pay for a consult with an attorney in your state, and probably pay that attorney some more money after the consult to draft documents that make the gift happen with minimal tax consequences. And then you have to factor in what the mortgage bank is going to think of it; they scrutinize gifts pretty closely.

DebtFreeBy25

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Re: Strange home buying possibility... Advisable?
« Reply #18 on: March 14, 2016, 10:54:09 AM »
It needs a LOT of very expensive repairs. Off the top of my head: structural issues under the kitchen floor, kitchen floor after water damage and structural sagging, every single window needs replacing, basement needs to repaired (everything ripped out and replaced) after sewer flooding years ago. And of course every major appliance is 15+ years old and on its last legs. (Furnace, water heater, washer/dryer, AC)

My mother is a hoarder, and this sounds a lot like her house. After 30 years of neglect, with no maintenance whatsoever in the last 15+ years, I consider her home to be nearly worthless. If I were to inherit a stake in this property, I would do what the father is trying to do and "gift" my interest to another family member.

Even if it were feasible to repair the home, dealing with a hoarder is emotionally fraught with unpleasantness, as I'm sure you've experienced. Convincing her to deal with the hoard or allow you to dispose of it would be a challenge in and of itself. Presuming you get her to sell cheap and clear out her stuff, there's likely even more costly damage than you realize. It's impossible to accurately estimate the full extent of the damage until the hoard is cleared out. Given your current financial situation and the costly repairs you'd need to make, it definitely seems like a bad buy even if it can be had for a good price.

One question: Are you likely to inherit this house? If so, you may want to take steps to address some of the less costly repairs and prevent future damage without purchasing the property. In the event that this property is going to become your problem sooner or later, gradually addressing the hoard and deferred maintenance would be in your family's best interests.