Two-Year Notice

[Knee Deep in Water Chloe]

There's been an interesting development in my family. 
I have two sisters. 
Since 2008, my sister has lived in a house owned by our parents (now just our mother as our dad passed away in 2012). 
My sister had my niece in 2007. 
Our parents bought the house from me in 2008 because my XH wouldn't take possession of it as part of our divorce. I owned and lived in another house, and I would have foreclosed on the house we're discussing. As our parents didn't want my sister and niece to live with them, but were intent on ensuring my niece had a safe place to live, them purchasing the house helped both me and my niece. The house has appreciated 100% since my parents bought it from me. 
Our mother has been charging her $500/month the entire time, but, by my sister's own admission, my sister doesn't always pay it. 
My niece is entering her junior year of high school. 
Our mother has informed my sister that our mother will sell the house upon my niece's graduation. She will sell it to my sister without listing if my sister wants to buy it. 
My sister has a GED and did not go to college. My sister has no savings, is in between jobs, and does not have very good credit.

At this point, none of it is actually my business. I am not in any way financially involved nor being asked to be financially involved. 
I don't think our mother is being unfair. 

I'm really just posting this as a discussion. There's nothing that I'm going to do or not do.

Just curious about what any similar experiences come to mind or "well, I would..."

Thoughts? 

[minnesotapaintlady]

Well, I'm guessing your sister won't be able to afford to buy it unless your mom gifts her the down payment maybe as a cash back from the proceeds of the sale kind of deal.  Then of course there's the question if she will be able to make the payments and pay all the maintenance and such, but I would file that in the "not my circus, not my monkeys" file.  They did you a solid, now want to help her out too.  Whether or not it does or not is TBD. 

[grumpyhermit]

What is the question exactly?

Are they selling it to your sister at fair market value, which sounds like it may result in sister getting evicted? Or are they proposing to sell it at a bargain price, which may be perceived as unfair to your and your other sister?

My main thought, is that it sounds like your sister is a tenant, and depending on the state, could make it difficult to sell the house if she tries to dig in when she realizes her sweet housing deal is about to evaporate. Will your parents actually evict her?

This is why I would never rent to family...

[daisylu]

I will have to revisit this tomorrow. My emotions are all over the place and I don't think I can be rational right now.

[Knee Deep in Water Chloe]

Aug 7, 2023 18:39:26 GMT -5 grumpyhermit said:

What is the question exactly?

Are they selling it to your sister at fair market value, which sounds like it may result in sister getting evicted? Or are they proposing to sell it at a bargain price, which may be perceived as unfair to your and your other sister?

My main thought, is that it sounds like your sister is a tenant, and depending on the state, could make it difficult to sell the house if she tries to dig in when she realizes her sweet housing deal is about to evaporate. Will your parents actually evict her?

This is why I would never rent to family...

No question at all. Just a discussion. 


FMV--I'm not sure. My sister wasn't sure. 

My other sister and I aren't worried about it being unfair to us. 

I think my mother would evict her. 
However, I don't think my sister would dig in. 
I think she'd leave town completely before she did that. 

[Knee Deep in Water Chloe]

Aug 7, 2023 18:23:07 GMT -5 minnesotapaintlady said:

Well, I'm guessing your sister won't be able to afford to buy it unless your mom gifts her the down payment maybe as a cash back from the proceeds of the sale kind of deal.  Then of course there's the question if she will be able to make the payments and pay all the maintenance and such, but I would file that in the "not my circus, not my monkeys" file.  They did you a solid, now want to help her out too.  Whether or not it does or not is TBD. 

At the current job situation and her clear money management of the last 20 years, I would agree that she cannot afford it. 
They've helped her out for the last 16 years just to take care of my niece--which is fine. 

I do think two-years notice of listing is definitely kind. The law in this state for selling a rental is 90-days from the close of sale. 

[grumpyhermit]

I think your mother is being more than generous.

I'm just leery of "deals" with family as my mother is currently dealing with a family related real estate mess that gets me heated every time we talk about it.

People can also react far differently than you would expect when a lot of money/housing is involved.

The market being what it is, if your sister is seriously considering it, it may be a good idea to have the price convo. I'm softly looking at the moment, and I'm keenly aware that the down payment I though I would need a few years ago when I started saving, is quite a bit less than I need now with current rates and prices to result in a payment I would be comfortable with. It seems like every time I save a bit, the goal posts move and I'm still short of where I need to be.

[billisonboard]

Your sister - Yeah, whatever. 

What about your niece?

[haapai]

Do you know whose name is on the utility bills?  Knowing that will tell you a lot. 

I don't want to say much more. 

[Knee Deep in Water Chloe]

Aug 7, 2023 19:10:53 GMT -5 haapai said:

Do you know whose name is on the utility bills?  Knowing that will tell you a lot. 

I don't want to say much more. 

How enigmatic.

[Knee Deep in Water Chloe]

Aug 7, 2023 19:07:06 GMT -5 billisonboard said:

Your sister - Yeah, whatever. 

What about your niece?

Which part? She’ll be 18 in two years.

I could see my mother letting her live in my mother’s house for a while.

[tallguy]

Not knowing where the house is, it appears to have been a long-term arrangement for significantly under market value.  There is no doubt the sister has benefited significantly already.  I'd offer this:  Rent-to-own starting now using today's FMV for the house.  Increase the rent to $1000/mo with the extra $500 being a purchase credit, so at the end of two years she effectively has paid a $12,000 down payment.  When the two years are up, give a year (perhaps) to make the permanent decision and obtain a mortgage to buy the house.  If she cannot obtain a mortgage to follow through with the purchase, then the mother lists the house for sale and the sister has to move out.  If she doesn't agree, she will have no leverage to stay in the house since she was offered the opportunity to purchase and declined.  Obviously they would need a written agreement to back everything up.  And just as obviously, every payment would have to be made each month without fail.  The extra payments each month are effectively "buying" the option to purchase the house at today's price rather than what the price would be in two years, along with being a forced down payment.   But no, I don't think she could manage to buy it either.

[billisonboard]

Aug 7, 2023 19:31:56 GMT -5 Knee Deep in Water Chloe said:

Aug 7, 2023 19:07:06 GMT -5 billisonboard said:

Your sister - Yeah, whatever. 

What about your niece?

Which part? She’ll be 18 in two years.

I could see my mother letting her live in my mother’s house for a while.

Okay I got it. Not a significant factor in the situation.

[haapai]

Aug 7, 2023 19:31:08 GMT -5 Knee Deep in Water Chloe said:

Aug 7, 2023 19:10:53 GMT -5 haapai said:

Do you know whose name is on the utility bills?  Knowing that will tell you a lot. 

I don't want to say much more. 

How enigmatic.

It could tell you a lot about what your sister can afford to pay for housing.  Or maybe what she used to be able to contribute toward housing before her child turned 18.  It generally gets worse after that.  At any rate, it would tell you a lot.  

Your mom seems to be headed toward a seller-carried mortgage that your sister probably won't be able to keep up with.  That probably means that you and your other sister will probably have to foreclose on your sister in order to stop the damage. 

I totally get that you have no problem with your mom being generous toward your sister, but it sure looks like this is going to become your circus pretty quickly. 

In case I am still being a bit too vague, I own a modest house purchased shortly after the 2008 housing crash that has a PITI of less than $500 but light, heat, sewage and water bills that are around $200 a month.  Can I modestly suggest that you should look into who has been paying or backstopping those utility bills?  We're not even talking about maintenance here, this is just the math about keeping the most basic bills paid and not losing the property as a result. 

[TheOtherMe]

The niece will be 18 in 2 years.  How is she supposed to support herself at that age.  

Where will your mother be moving? Someplace where a teenager can live?  If she's thinking of senior living, the 18 year old can't go.

[Knee Deep in Water Chloe]

Aug 7, 2023 20:43:57 GMT -5 TheOtherMe said:

The niece will be 18 in 2 years.  How is she supposed to support herself at that age.  

Where will your mother be moving? Someplace where a teenager can live?  If she's thinking of senior living, the 18 year old can't go.

I don’t think my mother is moving?

[Knee Deep in Water Chloe]

I must not have been clear—my mother lives in her own house.
My mother owns and lives in a house she owns outright.
My mother owns another house outright that she lets my sister live in for $500 per month. The FMV of rent for the house my sister lives in is at least $1700/month.

In two years, my niece (my mother’s grandchild) will turn 18. My mother doesn’t believe she should have to keep subsidizing my 40yo sister’s housing after her grandchild graduates high school and turns 18.

[Knee Deep in Water Chloe]

Aug 7, 2023 20:37:13 GMT -5 haapai said:

Aug 7, 2023 19:31:08 GMT -5 Knee Deep in Water Chloe said:

How enigmatic.

It could tell you a lot about what your sister can afford to pay for housing.  Or maybe what she used to be able to contribute toward housing before her child turned 18.  It generally gets worse after that.  At any rate, it would tell you a lot.  

Your mom seems to be headed toward a seller-carried mortgage that your sister probably won't be able to keep up with.  That probably means that you and your other sister will probably have to foreclose on your sister in order to stop the damage. 

I totally get that you have no problem with your mom being generous toward your sister, but it sure looks like this is going to become your circus pretty quickly. 

In case I am still being a bit too vague, I own a modest house purchased shortly after the 2008 housing crash that has a PITI of less than $500 but light, heat, sewage and water bills that are around $200 a month.  Can I modestly suggest that you should look into who has been paying or backstopping those utility bills?  We're not even talking about maintenance here, this is just the math about keeping the most basic bills paid and not losing the property as a result. 

Why would I find out who is paying the utilities? It’s not my business? Why do you think it’s going to become my problem?

[Knee Deep in Water Chloe]

Aug 7, 2023 19:39:12 GMT -5 tallguy said:

Not knowing where the house is, it appears to have been a long-term arrangement for significantly under market value.  There is no doubt the sister has benefited significantly already.  I'd offer this:  Rent-to-own starting now using today's FMV for the house.  Increase the rent to $1000/mo with the extra $500 being a purchase credit, so at the end of two years she effectively has paid a $12,000 down payment.  When the two years are up, give a year (perhaps) to make the permanent decision and obtain a mortgage to buy the house.  If she cannot obtain a mortgage to follow through with the purchase, then the mother lists the house for sale and the sister has to move out.  If she doesn't agree, she will have no leverage to stay in the house since she was offered the opportunity to purchase and declined.  Obviously they would need a written agreement to back everything up.  And just as obviously, every payment would have to be made each month without fail.  The extra payments each month are effectively "buying" the option to purchase the house at today's price rather than what the price would be in two years, along with being a forced down payment.   But no, I don't think she could manage to buy it either.

My husband had the same type of thought. It’s logical, but my sister just isn’t logical with her finances. It’s been 15 years, and she hasn’t taken initiative yet. Maybe this will be the kick in the pants that finally works.

[Bonny]

Aug 8, 2023 0:25:06 GMT -5 Knee Deep in Water Chloe said:

Aug 7, 2023 19:39:12 GMT -5 tallguy said:

Not knowing where the house is, it appears to have been a long-term arrangement for significantly under market value.  There is no doubt the sister has benefited significantly already.  I'd offer this:  Rent-to-own starting now using today's FMV for the house.  Increase the rent to $1000/mo with the extra $500 being a purchase credit, so at the end of two years she effectively has paid a $12,000 down payment.  When the two years are up, give a year (perhaps) to make the permanent decision and obtain a mortgage to buy the house.  If she cannot obtain a mortgage to follow through with the purchase, then the mother lists the house for sale and the sister has to move out.  If she doesn't agree, she will have no leverage to stay in the house since she was offered the opportunity to purchase and declined.  Obviously they would need a written agreement to back everything up.  And just as obviously, every payment would have to be made each month without fail.  The extra payments each month are effectively "buying" the option to purchase the house at today's price rather than what the price would be in two years, along with being a forced down payment.   But no, I don't think she could manage to buy it either.

My husband had the same type of thought. It’s logical, but my sister just isn’t logical with her finances. It’s been 15 years, and she hasn’t taken initiative yet. Maybe this will be the kick in the pants that finally works.

While logical, I think this idea just muddies the water further and may delay eviction because now the sister has a claim to an inputed down payment. Your mom has made her intentions clear. She's supported your sister long enough. Where's the niece's father? Has he been paying child support?

[anciana]

What does your sister say? Does she have any plans of moving out? What does your niece plans to do after high school? College and live away from home, or stay living with her mom?
The way things are right now and without more info, I’d say your mom will sell the house and your sister and niece will move in with your mom because they won’t have any other place to go.

[bean29]

I have some thoughts - first - I do think the question of who has been paying the utilities and if they are in your mother's name or your sister's name is valid.  In Wisconsin, if you don't pay your utilities, they cut them off in the summer months.  Problem tenants who don't pay their rent consistently usually don't pay the water and electricity bills on time either.  So, your mother probably has been paying them.

Imho, your sister can't afford to own the house.  If she did own the house, how would she keep up with the maintenance?  I have a friend from grade school that inherited her mother's house.  It is really too big for one person.  She has it crammed with stuff.  I think it has flooded and the roof may leak.  She can't afford the house and would probably be better off in low-income housing.  in order to sell, she would need to get rid of all the stuff she has crammed in there.  She says she has Fibromyalgia, and if true, would be another reason why she is not capable of doing Maintenace.  This person has a job with the school system and is almost 60 years old.  As far as your sister's situation goes, while the low monthly payment looks good, it may not be the best thing for her in the long run.  On the other hand, if she can't get into low-income housing, she will not be able to afford the rents that will be available to her.

We currently have one of my BIL's living in our rental property.  He pays consistently but his rent is below market.  We pay the water, and part of the utilities (complicated property issues).  We should sell next year, we probably won't.

I assume your mother is taking this action because she can't afford to continue paying DS's rent- or she hopes it will cause DS to become more self-sufficient.  

Idk what the best thing to do is, but your mother should make sure that if she has to go to court, her notification is documented properly.  Maybe she should review what she has done with an attorney?

[NomoreDramaQ1015]

After I got married my parents had a discussion with me about the house.   It was my grandma's house and I was renting it fairly below market rent from them for a few years by that point.  They considered that fair when I was right out of college and getting started.  Now I was established and married.   

We were reaching a place where my parents had to make a decision regarding the house.

Either I could buy it from them outright or they would need to sell it in a few years.   DH and I discussed it and bought the house.   We agreed on a price of $62k for the house.   We got approved for the mortgage, signed the paperwork and have continued to live in the house.

It was incredibly fast since we were doing FSBO and we already lived there so no need for inspections and all that stuff.  We bought the house "as is".

I think two years is sufficient enough time to start looking into what is available or if she can secure a mortgage.  Personally, I would not go rent to own that is too messy when you combine it with the personal relationship and the fact that as it stands now sometimes she can't make rent.  How is she going to make rent to own payments in a timely fashion? 

Make it a clean break either buy it out right or the house has to be sold.

Perhaps a compromise could be made that $X of profit from the house could go to your sister for first/last month/security deposit on a place if your mom was open to it.  Then she hasn't cut her off totally cold turkey.  What your sister does after your mom gives her a soft spot to launch is up to your sister.

[Knee Deep in Water Chloe]

Aug 8, 2023 9:26:29 GMT -5 Bonny said:

Aug 8, 2023 0:25:06 GMT -5 Knee Deep in Water Chloe said:

My husband had the same type of thought. It’s logical, but my sister just isn’t logical with her finances. It’s been 15 years, and she hasn’t taken initiative yet. Maybe this will be the kick in the pants that finally works.

While logical, I think this idea just muddies the water further and may delay eviction because now the sister has a claim to an inputed down payment. Your mom has made her intentions clear. She's supported your sister long enough. Where's the niece's father? Has he been paying child support?

No biological father in sight since my niece was a year-old. He never paid child support
My sister is actually married; her husband does work full time. 

[Knee Deep in Water Chloe]

Aug 8, 2023 9:41:02 GMT -5 anciana said:

What does your sister say? Does she have any plans of moving out? What does your niece plans to do after high school? College and live away from home, or stay living with her mom?
The way things are right now and without more info, I’d say your mom will sell the house and your sister and niece will move in with your mom because they won’t have any other place to go.

This announcement from my mother is less than two weeks old.  My sister's still in slight shock and frustrated. My sister is not one to make plans. My husband puts it as "she'll have to stop living like a teenager". I don't think she's frustrated about my mother not financially supporting her as she is that she has to face reality. My niece doesn't currently have any clue about post-secondary plans. I do think they could certainly all keep living in a house together (my sister, my niece, my BIL). 

My mother won't allow my sister to move in with her. If she'd have allowed that, she'd have gone that route 15 years ago. I could see her letting my niece live with her for a bit. 

[azucena]

The plot thickens. Two working adults should be able to afford $500/month in rent esp if mom has been paying anything maintenance related.

Hope niece breaks the cycle and gets some kind of degree and qualifies for fin aid.

See the anon note I just posted for similar wacky financial thinking.

[Knee Deep in Water Chloe]

Aug 8, 2023 9:49:52 GMT -5 bean29 said:

I have some thoughts - first - I do think the question of who has been paying the utilities and if they are in your mother's name or your sister's name is valid.  In Wisconsin, if you don't pay your utilities, they cut them off in the summer months.  Problem tenants who don't pay their rent consistently usually don't pay the water and electricity bills on time either.  So, your mother probably has been paying them.

Imho, your sister can't afford to own the house.  If she did own the house, how would she keep up with the maintenance?  I have a friend from grade school that inherited her mother's house.  It is really too big for one person.  She has it crammed with stuff.  I think it has flooded and the roof may leak.  She can't afford the house and would probably be better off in low-income housing.  in order to sell, she would need to get rid of all the stuff she has crammed in there.  She says she has Fibromyalgia, and if true, would be another reason why she is not capable of doing Maintenace.  This person has a job with the school system and is almost 60 years old.  As far as your sister's situation goes, while the low monthly payment looks good, it may not be the best thing for her in the long run.  On the other hand, if she can't get into low-income housing, she will not be able to afford the rents that will be available to her.

We currently have one of my BIL's living in our rental property.  He pays consistently but his rent is below market.  We pay the water, and part of the utilities (complicated property issues).  We should sell next year, we probably won't.

I assume your mother is taking this action because she can't afford to continue paying DS's rent- or she hopes it will cause DS to become more self-sufficient.  

Idk what the best thing to do is, but your mother should make sure that if she has to go to court, her notification is documented properly.  Maybe she should review what she has done with an attorney?

My mother can absolutely afford to continue the current situation. She just doesn't think she should have to support my fully capable sister's housing anymore. She owns the home outright. She wouldn't actually need to even sell it; she could rent it for FMV and have an income stream. At this point, not counting lost FMV-income; I estimate the house is costing her about $2k/year in property taxes and a few thousand in upkeep. 

Do you have to pay taxes on the FMV of the rent, or do you only pay taxes on what BIL pays you in rent? I think my mother is paying taxes on FMV rent and that is definitely annoying her. 

[Knee Deep in Water Chloe]

Aug 8, 2023 10:08:28 GMT -5 azucena said:

The plot thickens. Two working adults should be able to afford $500/month in rent esp if mom has been paying anything maintenance related.

Hope niece breaks the cycle and gets some kind of degree and qualifies for fin aid.

See the anon note I just posted for similar wacky financial thinking.

Right, when you take my BIL's income into it, why were they not able to have saved a down payment by now? 

[azucena]

Or even make rent every month.

[souldoubt]

Kudos to your mom for helping out your sister and niece for almost 18 years (once two years are up) allowing them to live a lifestyle in a house they wouldn't have otherwise been able to afford.  The fact that your sister is shocked and frustrated speaks volumes and is probably why your mom did it.  If your mom didn't set some kind of ground rules or end date your sister would go on living there in perpetuity until your mom passes and it falls to you and your other sister to deal with.  Your sister sounds like my wife's older sister who has angled for years to move back in with dad.  Her oldest child was raised by her parents then she had another kid 15 yeas later and she's always trying to "come visit" so she can drop him off and go do what she wants.  She's a teenager trapped in a 40 somethings body who refuses to grow up.  Dad put the kabosh on it years ago and has thankfully stood firm.  Your mom isn't going to live forever and your sister needs to learn to stand on her own two feet sooner rather than later.  She's got two years to figure it out which is something most people don't get in her living situation.