Good opportunity that could go wrong

[Amy Silva]

Hi, I have an opportunity to purchase my parents home for $500,000 in the Bay Area (Home could be sold for about 1.2 mill). Obviously, I would love the chance to get ahead of this crazy market, but there is some agreements that need to made.

1) Parents would be able to come and go, they want to live in house w/ us 6 months out of the year

2) Sibling would get $100,000 from sale for down payment to purchase a home in Utah for my parents to share w/ them so they can see grandkids in Utah and California

3) We all as a family would have to agree-we all want it in writing and I'm concerned that if it goes south it can cause problems w/ family relationships.

How would you go about this? Who should I speak to to work the kinks out if we go through w/ this, a real estae lawyer?

Thank you for your knowledge and advice!

[Caroline Gerardo]

1. Hand Write out the agreement on a notepad and have everyone sign and get two witnesses who are not relatives and not party to the deal to sign. 

2. Do parents have a will, do they have a trust, what are the tax consequences of gifting you that equity? Do they have medicare?  You may need CPA and attorney to advise about the plan. There are only two children? What happens when Dad passes can Mom stay with you? Does he or she who survives have enough income to last? Think long term plan.

3. You can handle the transfer two ways: a) non arms length sale where parents sell in escrow and is a family transfer deed.  b) parents add you to title now as joint with them and then subsequently apply to refinance cash out to give the funds to the sibling.

Can you qualify for the cash out refinance? This part you need to have a preapproval letter saying your income, credit, and assets can meet the conditions. 

Why will sibling only get $100000. and you get $600000? This will be the stumbling block for sibling to sign the very first step. Your parents have the right to sell without sibling permission but will the long term of that decision become resentful? Caring for parents for ten years in assisted living could cost $600000 today and showing this may soften the terms.

All the best to your family