My mother died in 2006, leaving my father who could not very well take care of himself. My sister had been living in Hawaii, but costs of living there had grown and income opportunities had shrunk, so she moved in with my father in Oregon in 2008 to help him until he died in 2010.
The house was left to the both of us in a trust. She has been living there rent-free for 11 years, covering the property taxes and repairs.
We are both living on our Social Security, which is tight for me, but impossible for her to live on, as steady employment was not her forte, and moving around a lot was. The house is worth somewhere between $400,000 and $500,000. Proceeds from the sale would split this between us.
She keeps finding reasons that the house is not suitable for selling. This delay has moved us into rising real estate costs, meaning that she cannot afford anything with her half.
I have put down roots since buying my first home at the age of 23, so I now live in a paid-off home. She does not recognize my needs for the proceeds of selling the house.
I love my sister, but I do not feel responsible for the fact that she has never acquired equity in anything in 70 years. She says, “This house is all I’ve got.”
I feel that I’ve been very patient for 11 years, but I’m feeling the financial squeeze of old age. I do not want my sister to be homeless and I don’t want to alienate her, but I am at a loss for what to do next.
I don’t think your only two options here are to make your sister homeless or let her live rent-free forever. She would have $200,000 or $250,000 from her half of the home sale. Real estate prices may be out of control right now, but not so much that she couldn’t afford a modest one-bedroom apartment.
In a perfect world, you could do what’s called a cash-out refinancing. You’d receive your half of the equity as cash, while your sister would take on a mortgage for 50% of the home’s value.
“Most lenders would typically approve such financing to even borrowers with low credit scores and limited income or assets because 50% loan-to-value provides very low risk to the lender,” said David Reischer, attorney and CEO of LegalAdvice.com who specializes in real estate and mortgage law.
The big problem, of course, is that your sister lives off what sounds like a meager Social Security income. She may not be able to afford even a small mortgage payment.
The extreme approach is to her sister to court. “When a co-owner of a house wants to sell and the other person does not, most state laws allow the co-owner who wants to sell to force the sale of the house by petitioning the court for a sale,” Reischer said. “The court supervises the sale of the property, ending in division of the sale proceeds.”
This process can typically take anywhere from six to 12 months. Of course, the damage to your relationship could last forever.
Your sister has been living rent-free for 11 years. She has every reason to keep making excuses. She won’t give up this arrangement voluntarily.
I think you should let her know that you’re at least considering taking the matter to court if she won’t work with you. Tell her you really don’t want that to happen. But tell her that after 11 years, you’re afraid that may be your only option.
Try not to focus on your sister’s poor choices when you have this discussion. Focus instead on what you need, which is your half of the equity in the home your father left you both. Hold firm when she says the house is all she’s got. Perhaps that’s true. But she can also walk away with half the proceeds from selling a home in a red-hot real estate market. If she insists she’ll have nowhere to go, point her to some Zillow listings that would be within her budget.
Perhaps with some pressure, your sister will be more motivated to either sell or find a way to make a small mortgage payment. Could she rent out a room in the home for income? Or could she take a part-time job?
If your sister still refuses to budge, you’ll have to decide whether to actually take her to court. Ultimately, you’ll have to choose whether to sacrifice your relationship with your sister to get your stake in this home. I hope that’s a decision you won’t have to make.
Robin Hartill is a certified financial planner and a senior writer at Codetic. Send your tricky money questions to [email protected].