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XP Selling House - Splitting $
I will try to keep this to necessary details.
My husband and his father bought a house together.
2005-2008 My husband and his first wife paid 2/3 mortgage, his father paid 1/3.
2008-2011 Husband = 1/3, his father 1/3, a renter 1/3
2012- My huband and I paid 2/3, his father 1/3.
Since they bought the house, FIL has maintained a 1/3 mortgage payment. He has also not contributed to any fix-up projects such as paving the driveway and re-doing kitchen floor.
It appears we will be making a profit on the sale of the house this spring (just listed); and FIL wants half the profit, giving us the other half. I'll answer any questions if I left anything important out.
Is there a finanacial advisor, or someone we could talk to that would suggest a way to split the profits that is more fair? I feel like we are really getting screwed over in this deal, my husband doesn't know if its worth fighting his father over. Any advice appreciated.
Re: XP Selling House - Splitting $
Who's name(s) is on the title?
Who's name(s) are on the mortgage(s)?
Both their names are on the deed, and both their names are on the mortgage.
They wanted to add my name to the deed as well, but Im pretty sure they haven't (and wont, now that we're selling)
FIL paid 100% of the down-payment initially, but we paid him back every cent (without interest- he wouldnt accept more)
Unless there is more to the situation (liek the FIL paid the majority of downpmt) it seems only fair that he recieve 1/3 of the profit minus the cost of improvements that you made. Has your husband tried politely asking why he feels entitled to half?
Who has been claming deductions for taxes regarding mortgage interest and property taxes? Also, was anyone filing taxes to report the rental income? If so then I would take that into consideration as well.
Edit: Just saw your reply regarding the downpmt. If downpayment was lets say 10,000 and the entire downpayment was basically paid by you and your husband (as you paid FIL back every penny), then that 10,000 should be deducted before FIL get's his share. Why should the FIL get essentially half the DP back from the proceeds if it's 100 per your money in that "pot". It does seem unfair to me to be honest. But as to whether or not to fight it, it depends on how much money we are talking about. There is a chance it could damage relations if it gets ugly. Then again, if I was in your shoes and didnt get a fair amount of money then I would hold resentment which means relations would be damaged either way.
He has not asked him, he doesn't want to mix business and family (my view is its already mixed, it should be discussed!).
My husband has claimed the deductions, and all things house-related come tax time. Their deal was he would get the tax break, etc. if he also did all yardwork, shoveling, lawn mowing, etc.
^This is what I'm afraid of. It could be about $60,000 that is getting divided, and not to be petty but I feel I wouldnt be able to control feeling a little resentful. Also, FIL is taking his portion of the profits and giving as a gift to his other 2 sons so they will be able to start looking for houses as well. (Not that how he spends his money is important to this situation- but its like it doesnt even matter to him he is giving it away anyway!!)
OK, now we are talking about enough money that I would advise addressing it. If it was a few thousand that is one thing but 60,000?
So basically he thinks he should get $30,000...
IMO he should get:
(60,000-downpmt amount)/3
This is a good amount of difference. If they discussed the tax issue (which that arrangement sounds fair IMO), then they should be able to discuss this as well. It's a bit awkward, but you and your husband have a good amount of money on the table and IMO it's worth bringing it up in a calm and constructive manner. I would tread carefully so emotions don't become added to the mix, and not mention what he plans to do with the money (although I do agree it shouldn't matter nearly as he is giving it away anyways)
I completely agree... I would like to speak to a unbiased third-party. I feel like "Since this is a huge issue I would really like peace of mind that we are doing things the right way"
is a lot better than:
"How about you only get a third, FIL?"
Sigh. Do financial advisors usually cover this type of issue??
Honestly, I would probably consult a real estate attorney. You're talking a lot of money and it would be worth it to get a professional outsider's opinion. That is probably the best way to avoid hurt feelings in the end because the attorney will be able to tell you what legally each of you is entitled to.
my read shelf:
Real estate attorney. Now why didn't I think of that?
Thank you!
I think the easiest was of dealing with this hear is to make an excell speadsheet that shows every single outlay of cash from down payment, to monthly payments, to repayment of the down payment to FIL, to expenses paid for upgrades, etc. Then at the end, do a quick calculation of total costs, % spent by each side, and amount that should be split at the end of the sale based on that %.
Also, I would create a second spreadsheet that totals the costs of lawncare and maintanance is if you would have paid it each year that your DH took a tax credit. Then, see if that balances out. If it does (or woulkd have cost more than DH got back) keep that handy too when having the discussion with FIL.
Without your FIL putting down 100% of the DP, you guys wouldn't even have the house. This is regardless of the fact that you guys have paid him back.
He did a very generous thing by putting the down on the house and then continuing to pay a third of the mortgage.
In my mind, he doesn't seem like he's out to screw his son over. I don't think there's anything wrong with splitting things 50-50 with him when it comes to the sale of the property.
This is, of course, skewed by my own family dynamic.
Who is living in the house?
Is FIL living in the house? If not, why he is paying on the mortage at all? Can you clarify?
But I'm going to say.... They've had this arrangement since 2005. Why did his dad help in the first place? Did your DH need the help? I'm assuming so since your FIL put down the deposit at the start.
Back to my point, though. This has been going on for over 7 years. It's his father. You've only been involved for the past year. Your financial involvement is a LOT less that your DH's. And, again, it's his dad. If he wants to go 50/50, I'd go along w/ it.
It sounds like somewhere along the way, his dad did him a HUGE favor, and to start involving lawyers, etc, in order to make sure you all get your exact fair share - even though your DH may have never been able to buy this house in the first place w/o his dad - has the makings of ruining a family relationship.
~Benjamin Franklin
DS dx with celiac disease 5/28/10
Have you checked with the bank whether there is a clause in the mortgage itself stating how the proceeds would be split upon sale? It might already be set in stone.
Depending on how much money is involved I don't think I would make the world's largest stink over this. The father enabled your husband to buy the home in the first place, and if your H had defaulted the father would have been 100% liable. That's a big risk he volunteered to take. Theoretically, he might also make future investments in your family down the road. I don't think I would want to ruin that benefactor relationship.
Maybe what you could do is compile some number showing how much each of you have contributed in terms of the down payment, mortgage payments, and general investments in the home (beyond routine yardwork which you stated was in the original agreement for your H to take care of). Total them up, then subtract from the father's share the money you've repaid him. What's the ratio of actual contribution? I would go from there in deciding on the split of proceeds. If it's not already spelled out in the purchase documents.
edit: I see you've clarified that the amount in question is whether the father received 20k (1/3) or 30k (1/2). So it's a question of 10k in your pocket. That's a fair bit of money but again, I don't think I'd risk ruining a family relationship over it. Especially after the father was so generous in helping out in the first place and plans to use the money to help out others as well. Think of it as paying it forward.
Yes, the downstairs is an in-law apartment (its own kitchen, living room, bathroom, everthing) so he lives down there.
You're not the only person who's said this... I think I'll try to adjust my thinking so it's along those lines, and instead of using charts and attorneys I'll just find a way to kindly ask if we're going to be taking other things (rent, repairs, etc.) into consideration or not.
I work for a lawyer, I know enough that it IS in fact, my deal. Now luckily for my family, I'm not a *** so I would never come at them that way. But my house (legally) = I have the right to an opinion. I won't fight them if they don't want to consider my opinion, because I love them.
Look - quote the law all you want, but I think the bigger issue here is family relationships. And the point is that your DH has been involved in this a LOT longer than you have and has put a lot more $$ into this than you have.
If HE doesn't want to fight his dad, then follow his lead. You say you have a right to your opinion, and you do- but this entire post is about "who can I see about this?" and you want to pull in an attorney over this!
What's allowed by law isn't necessarily the "right" answer. The law doesn't take into account emotion or relationships. Which can be good sometimes, but it can also be bad.
You're afraid you're going to feel resentful if you don't get the full 1/2, but let's say you win and you get your 1/2, but in the process relations between your DH and his dad are ruined. There could be a very good chance that your DH will resent you for pushing him to do this.
So think long and hard about how important this money really is.
~Benjamin Franklin
DS dx with celiac disease 5/28/10
ETA: Also, H is unsure about the fight. He is a little hurt by the fact that FIL treated him as a "loan" and is treating his other 2 sons down payment as a gift. But, as I previously stated, how FIL spends his money is none of our business.
~Benjamin Franklin
DS dx with celiac disease 5/28/10
I can understand that sentiment. I think it's just biology for siblings to worry about favorites and be competitive. However, there's no reason to assume that if the other siblings sell their homes prematurely, that their gifts won't also be treated as loans.
I guess it's also possible that the father is mentally punishing your H for his divorce (even unconsciously), but that would be a discussion for an entirely different day.
Are you married? Your bio says a wedding date in 2016.
My point is --legal or not -- you have no moral position in this agreement. You were not party to the original plan. Are you willing to cause problems between DH and his father? At what price to his relationship to his father, the relationship between you and FIL and the relationship between you and DH?
Oy vey.
There are several things going on here that concern me and they all go back to the original intent of both your husband ("H") and your FIL at the time of the purchase of the home.
1) Why did H repay the full $10k of the down payment? It seems to me that if the goal was to truly SHARE the ownership of the home, he would have only repaid $5k so that each of H and FIL had put up half of the DP.
2) Were FIL's 1/3 payments (a) payments of rent or (b) payments on the debt service, which would then build equity? When he lived there, a renter was not living there, thus, each of H and FIL lost out on rental income, so either the opportunity cost should be reflected as a loss to each of them (equally allocated), or FIL was paying "rent" not debt service when he lived there. If FIL was actually paying "rent" and not contributing to the debt service, then I think there is likely some question as to whether FIL is even entitled to 1/3 of the profits.
Basically, H and FIL need to have a sincere discussion about what each of them originally intended.
ETA: after going back and re-reading the initial post, it seems pretty clear that during the time FIL lived there, he was only contributing 1/6 (50% of his 1/3) to debt service and that the other half of his payments were making up for the rent (since the third party renter was paying a full 1/3 of the mortgage when the home was being rented to a third party).
ETA2: You and your husband need to decide if as a couple you care. I probably should have said that first since it's the threshhold issue, but if you do, I think it starts with sitting down with FIL and figuring out what the true initial agreement/expectation was.
Yes- I changed the date in the bio so TK wouldnt auto-convert to TN (Even though I dont go on TK, and havent so much as lurked since last May)
No- Def. not willing to do that unless my H is.
Their initial intent was for H to move in with his first wife, and live there forever, keeping the house and not re-paying FIL the downpayment as it would be treated like H's house after FIL passes.
FIL's contributions were considered rent, as it was 1/3 of mortgage payment and utitlities and other bills. FIL and H consider each other half-owners of the house since they decided on it together and have both their names on everything.
This is contradictory for several reasons, but if their understanding was to each be a 50% owner, then of course your FIL wants 50% of the profits.