View Mobile Site

What to do with dad’s house with $330K mortgage

Text Size: Small Large Medium
POSTED November 1, 2013 10:07 p.m.

Q:  My dad is in his 70’s still working.  Mom died a couple years ago and he’s left with a mortgage (remaining balance of $330K on a single-home) on top of house maintenance,  monthly costs and unpaid debts.  Lately, dad expressed concern that he is getting old and worried how he can pay for the house.  He is opposed to selling the house because of life memories.  Stated the idea of us (family of 3, paying mortgage on a townhome bought in 2010) moving in with him.  Wife and myself are hesitant because we cannot afford the cost of keeping that house if ever he goes.  I guess my questions are: (1) what are the financial implications for us (I have two other brothers) if left by dad with an unpaid house?; (2) how should he arrange his financial affairs at this point?; (3) what can we do to assist him with arranging financial affairs so he could retire?  Stuart.

A: Stuart, I am not a financial planner but do have some suggestions. First, however, are all three brothers on the same page? Does one or both of your brothers want to keep the house after your dad dies? If there is any dissent among the three of you, then you each should retain your own attorney and try to reach an amicable resolution.

However, if you are all together, here is my suggestion Your dad needs at least four legal documents: (1) a Last Will and Testament; (2) a Living Will – also called an Advance Directive;  (3) a Durable Power of Attorney, and (4) a Durable Power of Attorney for Health Purposes. He should consult with his own lawyer; you all can take him to the attorneys’s office but he – and he alone – should meet with the lawyer.

You can also suggest that if your state has adopted the Transfer of Death Deed law, that he consider doing this during his lifetime. You can find more information about this relatively new concept on the internet.

To answer your question as to what happens when he dies, assuming the three of you will be the only beneficiaries, you can sell the property. Hopefully if there is any equity after the mortgage and all closing costs are paid, the three of you will divide those proceeds according to how your dad decided when he prepared his Will.

It is very important for your dad to have a Will. You can’t obviously force him to do it, but you should certainly try.

Q:  Hoping that you will answer my question regarding” The Homeowner’s Association”. Yes, we need an association but the way it’s been started leaves me with questions.  A group of 5 started this with only certain people were invited to the first meeting. The president of the group took the volunteer job to help his “EGO’ and the rest are whatever.  Since I have worked in the corporate world for many years, I find that in doing this there have been many mistakes.  We have been asked to sign papers giving the secretary the right to vote on matters.  When attending meetings, there is no sign in sheet or a copy of an agenda, etc.

My question is: “aren’t minutes – if  any are taken – supposed to be sent to the members of the homeowner’s so one knows what has gone on or going on.  When, I asked this question I was told that it isn’t necessary for the minutes to be given out according to the attorney, and we don’t even know who that is. Since, I am unable to attend the meetings due to health and age I feel that something should be done but I have been told if interested I should make the meetings. Joan.

A: Dear Joan. I could write a book on the number of apparent violations that you have described about your home owner’s association. Read carefully your association legal documents. Typically, in a condominium, they are the Declaration and Bylaws; in a HOA, they are the CC&R’s (covenants, conditions and restrictions) and Bylaws. If you do not have a set, the President -or your management company -- must be able to provide you with a set. Alternatively, they usually are recorded among the land records in the county where the property is located, and you can get them from that office.

First, there has to be a notice of a meeting, where the election of Board Members will take place. All owners –not just a few selected ones – must be provided with that notice. At the meeting, a quorum must be present. That number – which can range from 25 to 51 percent of the owners – must be present at the meeting or there can be no formal meeting.

If there is a quorum, the members vote for the Board of Directors.  Once the board is elected, they elect the officers.

Typically, minutes should be kept at each meeting. Those minutes must be made available to all owners. However, that does not mean that they have to be mailed; this can be an unnecessary expense. Some communities have web-sites where the minutes (as well as the association documents, etc) are posted.

In your case, since you apparently cannot attend the board meetings, you should make arrangements with a neighbor to get a copy of any minutes that are taken. If you look at your legal documents, I am fairly sure that there is language to the effect that books and records are to be made available to all owners. Sometimes, you may have to pay a reasonable fee to get copies.

My suggestion: if there are other owners who share your concerns, mount a good old fashioned political campaign to elect board members who will be more responsive to the needs of your community.

Q:  Back in 2006 my son, age 22 at the time, and I formed an LLC each of us being 50-50 partners. It was formed for the purpose of real estate investing. I basically was the main investor, for my son had no money and I thought this would be a good way to bond with him. It wasn’t long after that he moved to Florida from our home state of Pennsylvania.

Here is my problem: We both signed for a mortgage loan on a property owned by the LLC. We both guaranteed payment , not actually thinking about the possible consequences. Like all my properties, this property went under water when the market fell apart. I am keeping up the payments but I will soon have to short sale or have it foreclosed on. I don’t care how this affects me but I don’t want it to hurt my son’s credit report and score. He is now married and has a 6 month old baby and will soon be making decisions on buying a home etc. I officially had him removed from the LLC by filing with the state last December. Is there any way he can be removed from this financial obligation? He really had not been an active partner and did not put up any of his own money . I need to find a way to get him out from under this? How is it possible?  Cletus.

A:  Cletus: if it is any consolation, you are not alone. This is a typical situation where husband and wife own property, both are on the note and deed of trust (mortgage), but they are divorcing and one wants out of the financial as well as the marital obligations.

Unfortunately, from my experience, rarely will the lender let one of the parties off the hook – regardless of how financially strong one of the parties is. The lender will require a refinance with the person who will stay with the house.

When I have mortgage questions, I often ask my friend Jack Guttentag – also known as The Mortgage Professor. Here’s what he had to say: “The only wayhe is going to get his son’s name removed from the note is to assume the full obligation himself. He either a) sells the property and pays the deficiency out of pocket, or b) refinances with enough cash inserted to make the deal acceptable to the lender, or c) pays off the mortgage.  He has to decide whether he is prepared to swallow the equity deficiency in order to protect his son’s credit rating.” (For more mortgage information, check out www.mtgprofessor.com).

This is a good lesson for everyone. Remember that there may be consequences down the road if you personally guarantee a loan for someone –whether that be your son or a friend. You are putting your credit worthiness – and your assets – on the table.

Commenting is not available.

Commenting not available.

Please wait ...