Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Buying from in-laws?
This Saturday my husband and I will be meeting with the in-laws to discuss purchasing one of their rental homes. We live near Santa Barbara CA, property here is some of the most expensive in the country. They have already quoted us a price ($400k) which we feel is not a bargain by any means.
I need some advice... do you think it would be wise to ask them to reconsider on the price? Maybe we could point out how much work the place needs (it hasn't been upgraded at all and is only a two bedroom) and also let them know a bit of our financial issues?
Also, we are planning on making this transaction without any realtors involved. Does anyone have advice on any legal issues I should be aware of or special documents I will need to have signed?
Lastly, I am trying my hardest not to become bitter towards them for their rather selfish approach. I would think due to the fact that they are well-off that they would want to help their only son and his new wife out a bit more. I need to get my attitude in check before the meeting so any advice/perspective would be much appreciated. Thanks ladies!
Re: Buying from in-laws?
No, I wouldn't because I don't believe in mixing business with family. It is a recipe for disaster.
Now, if you don't think the home is a good value, the by all means don't buy it. However, I think you are acting a bit...well selfish here. Asking them to give you a discount because your husband is their son is no different then them asking you to pay more because they are his parents. Sure, some parents will give their children a great bargain to buy their home, but not all do. It is their home and they can sell it for whatever they please because it is in their best interest. Likewise, you can decline the home as well if it isn't in your best interest. Again, all of these issues are exactly why mixing business with family is a bad bad idea.
If you do decide to proceed with the purchase without the aid of a realtor, then I would consult a real estate attorney.
Don't jump into this because you think that this is the only house that it out there. I say go and talk to them but tell them you want to do some more research on the housing market. Maybe their price is reasonable nad maybe it is not. Like someone else said, don't buy this house if it is not what you really want. It will create more problems in the end.
Thank you all for the feedback. I need to include a bit more info so you can understand the whole of where we are coming from. My in-laws inherited both rental properties. They just sold a boat (over 100k) and their combined income is well over 300k a year.
My husband and I have been extremely diligent/responsible in saving our money. We have enough for a 20% down payment and have only been saving two years. However, our combined income after taxes is only in the 60k range. They call us DINK's- Dual income no kids- we are being taxed out of our brains.
As far as the value of the property in this current market, I believe 400k would be a good price for the general public. We have been looking since October for a home and I am obsessive about knowing each and every property that comes on the market so I am well informed on prices. The problem is we have very low inventory and so the control is really in the sellers hands.
Maybe I am the one that needs to change my perspective/attitude, but I come from a family that is VERY generous with the very little they have. It is really hard for me to understand how my husband's family thinks. I feel if I were in their situation, I would do everything I could to be generous to my child and help him out. We will see how the meeting goes tomorrow and I will remember all of your suggestions.
I think you are being unfair. His family is different, not wrong or bad, just different. Besides, if you and your husband are the ones who will be inheriting their belongings one day, you will be glad they are like this. I know if my parents were to sell their home, they would give me a deal, but I doubt they would be overly generous and I also wouldn't expect that from them either.
If your ILs live in a HCOL area, then they really have to be very careful about what they do with their estate as it might effect their retirement and therefore their future.
However, as you can clearly see, this is why dealing with family is a bad idea. Both parties go into the situation thinking that the burden is on the other group to help them out and give them a good deal. For all you know his parents are over there thinking " Surely our own son wouldn't be the one to lowball us with this house right, he wouldn't do that to his parents would he ?"
It doesn't seem to be the popular opinion, but I would expect them to cut you a deal. They inherited the house so they didn't pay for it and with the lack of realtor fees they will be saving at least 5-7%. Both my family and my ILs are generous when they can be so it is surprising to hear that your ILs wouldn't even give you the 5-7% they would save in realtor fees. Yes, I know everyone is different but, as a parent, I couldn't imagine charging my child the full amount and then keeping the extra 5-7% I got from going FSBO.
Maybe they aren't as well off as you think, maybe they think the market is better than it is and they are giving you a deal, I don't really know. However, I do have to agree with the others that I wouldn't buy the house unless you really loved it.
Just a quick thought- have they had the house appraised recently? How long ago did they inherit it? If they inherited the house in 2006ish the value would have been much higher. They would have had an appraisal done at that time for tax purposes. If the last appraisal said the house was worth $600k at that time they could be underestimating the fall of real estate prices and still think they are offering you a good deal. This could be totally wrong, but I thought I would throw it out there.
Disneygeek, we are not asking them to give it to us for free. We are asking for generosity--which isn't an absurd request. If they are asking 400k and we want to offer 350k, we should have every right to offer what we feel the property is worth. If they don't like it, they don't have to accept. In the long run, I expect the right things from people- between generosity and greed, which one sounds like the right choice to you? I am never going to lower my standards and expectations, however, when people do not meet those expectations I do my best to extend grace to them as I also need grace from others when I screw up. We are all human here, but I do think that as FAMILY, we should try and help one another out when we have the means to do so.
I will update all of you on the status of this issue tomorrow after the meeting at 4, wish us luck!
Definitely offer what you are willing to pay. But be careful about mixing family and money. If you do proceed, at the very minimum I would hire a real estate attorney to draw up a contract of some sort. Worth the few hundred dollars to protect yourself and have full understanding of the deal you are getting. Otherwise you really may regret it. Anyone know doing business and mixing money with family is tricky, so if the balk at the idea and refuse to get some sort of actual contract, I would steer clear. Like I said in my previous post, especially if its not something you would consider buying anyway. Otherwise you may resent them forever. The problem with family mixed with business is different expectations. Your expectation is obviously that they would be generous and understanding and would result in a slightly better deal for you than the average joe. Whereas their expectation may be that if you couldn't otherwise afford it then you shouldn't be buying it. Or if you would be willing to pay someone else more for it why should they lose money at your expense. Selfish, maybe but that's just how some people view it. I would be different if they were trying to charge you more or take advantage of you, but expecting you to pay fair market value without gouging you is reasonable in my opinion.
Te following is my personal example of how financial security and greediness on the outside is not always what it seems: we recently were in the awkward position of my SIL looking at our house as a potential buyer when it was for sale. I'm a (new) physician, my husband is a (entry level) research scientist, so in theory we make "a ton of money" in the eyes of SIL who currently works part time and is in cosmetology school. In real life we had nearly $200k of student loans which total about $2000 per month (not counting his student loans) and I had just spent $5000 on board exams, $2000 on study courses for said board exams and $1500 on medical licensure. After completing my training I took 1 month off to study for boards, and due wierd stipulations to my employee physician contract I did not receive my first paycheck at my first job until I had worked for 8 weeks. Long story short that was a 12 week period of zero income for me, and living off my husbands salary to finish saving up our downpayment on our new house we were planning to buy, pay my (and his) student loans in full, pay for my board exams and pay our old mortgage payment. His salary is equivalent to that of a schoolteacher. Which didn't go far on its own. We had only owned the home for a few years and had a few thousand dollars equity, most of which was eaten up by our realtors commission.
i promise you I'm not trying to sing a sob story because I'm not, but sometimes what seems to you like "greediness" on the outside is simply someone trying to keep all the bills paid, our SIL made the remark (mostly jokingly) that she knew we would cut her the "family deal". Had we sold it to her for exactly what we paid for it, we still would have "lost money" after the commission rcsuse we had so little equity... something at the time we just couldn't afford to do, but at least could have probably walked away from the closing eithout owing anyone much money. Had we given her a "deal" and sold it for less than what it was worth, we would have actually owed quite a bit of money at the closing. Which was crazy. I would have literally felt like we were paying her to buy our house, even though we too were in a pretty tight finsncial bind. Which felt crazy, considering we could have sold it to someone else and actually made a small amount. (By small amont, I literally mean like $1000) or at least broken even. Seemed like a no brainer.
Plus, what would happen if the heat/roof/plumbing went out after she bought it.? Or if there was a terrible house fire while she was there? We would have felt terrible and would have worried that she secretly blamed us everytime something went wrong.
luckily she wasn't bitter at all, and actually found a different house that was much more suited to her needs, and I think we were all happy and relieved to not need to go that route of mixing family and business. We are much better off now- my income kicked in, we sold our house, and things are better, but for that brief point in time cutting her a deal was not an option.
sorry for the long post, just trying to give you insight as to why someone so "well off" might not e able to be more generous. There are millions of scenarios.
but again, I advise against mixing family and business unless you just cannot bear to pass it up.. And if you do decide to go for it, protect yourself and get a real estate atty involved.
good luck!
eywj, I really appreciate your response, it made me think! I guess I can never be 100% sure of what the other perspective is here. It is true, from the outside it really may appear someone is doing much better than they are in actuality.
I am going into this meeting today with my business face on. No emotions, no anger, no bitterness, just presenting our research and our finances and what we are willing to pay. If it's meant to work out then great. I am not going to rule out this opportunity without thoroughly discussing everything with them. So far our only means of communication have been via text message. Today will be our first face to face meeting. Another thing I am going to do as their DIL, is let my husband do the talking. I want to stay out of it as much as possible and only interject as needed.
Thanks for the good luck wishes, I will update after the meeting at some point!
That's how farms have been passed down for generations. No, it doesn't always work, but if the 2 parties WANT it to it WILL!
Many families have been split, and I get that.
Communication is the most important. I am a butt about some of the things my hubby and his family have worked out, and don't get me wrong, I don't 'roll over and play dead', but hubby is way more open minded about this stuff than me. I do, however worry about hubby's siblings. Fortunately all is in writing, we've spent a ton on lawyer's fees, but for me it was all about CMA (covering my A**)
Good luck to OP.
**edited for some of my spelling mistakes**
Thank you all so much for caring about my situation and giving me advice! So the meeting went incredibly well. My husband did most of the talking, explaining our situation and how we made a list of the pro's and con's of buying their home and what we would be compromising on. I also let them know that 400k is our limit, and given the fact that we are settling on certain things, we would not want to spend that much on the house. We found out that the home will probably need a new roof in the near future, which also effects the amount we want to pay. I let them know we are willing to do this without realtors, and we will be getting a real estate attorney to help us with the necessary paper work.
I also made sure to thank them for all the other kind things they have done throughout our marriage to be there for us and for paying off their sons college tuition. When I thanked them I sensed an immediate shift in the tone of the meeting, they went from being in business mode to...more kind and understanding. I also said "We want you guys to know that we do not want to put any pressure on you to sell to us. You have no obligation to sell to us if things don't work out to be mutually beneficial. Our relationship as a family matters much more than anything else."
So in closing, we didn't name the price we want to pay (we are hoping to get it for 350k), we told them once they have the property appraised and we get to see the condition it is in (the tenant moves out July 8th), then we will talk more. I think we gave them enough to think about--- the compromises we are making, and the fact that 400k is our max. I also threw in there how much we are making collectively as a couple; I think they assumed we were making more than we actually are. It was a very civil conversation and I was really relieved at the end of it because I kept my cool, said what needed to be said, and my husband was very straight forward. More to come on all this I am sure... thank you all again for your input, I am going to sleep much better tonight!
Sounds like it was a productive meeting!
Have you figured your finances to own a home that will cost 350-400K?
A mortgage for 300K at 4% will be 1432 per month. Then add your home insurance and taxes along with utilities, repairs and general maintenance. Not to mention decorating etc.
Do not buy anything at all until you are sure you can afford what you are buying. (Do you plan to have children - stay at home ( loss of income) or continue to work (child care costs) -have these been figured into your finances for home ownership?
Remember this is a business transaction - not a how much to IL's "love" their son etc.and want to "help" the two of you. It does not matter how they got this home, it belongs to them and it has been a source of income for them (so they are losing this by selling it)
I'm just seeing this thread now and I have to ask - OP, if your combined income is 60k, are you even sure you can afford to be purchasing a 350-400k home? My H & I have a higher combined income than you guys and when we went over our numbers (repeatedly), we knew that there was no way we were comfortable with buying a house for that much money. If it was the bank that told you that you could afford this, I would not trust what the bank says because our bank tried to tell us the same thing - in fact, they told us that we could take a mortgage out for 450k and when we ran the numbers on our own, it just didn't add up. So ok, we MAYBE could have taken out a mortgage for that much, but then we would have had no extra money for things like food or other necesseties. I'm not trying to dicourage you since I do not know what your whole situation is, but really think long and hard about this before you guys get in over your head.
And one other thing too - while the decision is entirely up to you guys about purchasing the home from your IL's, like others have said here, I would seriously think long and hard about mixing business with family. My parents bought their current home from my grandfather, and in the end wound up really regretting it because of all the problems they wound up having with the house. Things like faulty electrical work, floating joists (which were discovered when they had the kitchen remodeled), etc etc. They should have had the house inspected before they bought it, but my grandfather somehow managed to convince them that they did not need the inspection. (stupid them for doing that, obviously) Every single time I go visit, I get to hear about all the horrible things about the house and how they never should have bought it from my grandfather. So yea, just think about it and then make sure you have something in place to C.Y.A. if you decide to move forward with the purchase....
Ok, I did the math, and it's $1435, just for the mortgage. Why are you saying that it includes property tax and insurance? That's the mortgage cost alone.
I'm with others here, I think you're in over your heads, even at $350. I owned a house by myself when I made $60,000, and I could just make ends meet, with a $165000 mortgage. I don't have an extravagant lifestyle. Things add up, like utilities, repairs, etc.
I also vigorously second NOT mixing family and money. When my DH moved in with me, we rented his house to his brother. What seemed like a great idea was the worst decision of my life. It eventually destroyed my and my DH's relationship with his brother, and almost destroyed our marriage. Please please please don't buy a house from family!
R. Wilson, thanks for the thoughts. We have $0 debt. We currently have $100k in savings, no kids yet...and we are paying $1350 a month in rent plus utilities. Let's just say that we end up paying 350k for the house (this is the amount we are comfortable paying for this prop). If we get a fixed interest rate at 4.0% our principle and interest comes out to $1336.76. This assumes we will put 20% down which we definitely will. Keep in mind, this is LESS than our current rent and we presently are able to save $2000/month. With prop tax and insurance, our payment would be $1781.35. We will also leave realtors out of the deal and get a real estate attorney to present the proper paper work (no realtor fee's= lower closing cost).
Sometimes it isn't how much money you make that makes the difference but rather what kind of lifestyle you live. We are extremely good at saving money. I know people that make WAY more money than we do and they are always struggling to make it financially because they live lavish lifestyles. Let me give you an example: despite the fact that we have money in the bank, I am still driving around my first and only car that I bough IN CASH when I was 16 years old. I worked my butt off while going to college so that I could pay off my BA in psychology without taking out a single student loan. I don't believe in going into debt unless it is absolutely necessary for huge purchases.
We've decided that if the mortgage on our house figures to be less than our rent, we might as well be investing into a house each month rather than watching to go to rent.
Like I said, I didn't know your situation but seems like you guys are on the right path and as long as you are comfortable with the amount of mortgage you plan to take out along with the other expenses that go along with being a home owner then I wish you all the best. It's true though, if you can buy a house now with these interest rates, it's much better than throwing money out the window on rent.
That's pretty much how we felt when we bought our house...just felt more comfortable spending less on the mortgage. We have no other outstanding debt either, btw
Oh yea, and I still think you guys should really think about whether or not its a good idea to buy from family too...think about it and don't let his family pressure you either - that should be a decision for you and your H only...GL
R. Wilson, we will definitely think this through thoroughly before making the decision. I really do agree with you that we shouldn't buy it if we feel pressured into it. We won't. There are just crazy factors with the city we live in-- investors are snatching up properties before they even hit the market. They are buying EVERYTHING up in our price range. We even made a blind offer on a house offering 30k over asking price and still didn't get the property. The fact that we know for sure we would get this house is very exciting to us, even if we are settling in some ways.
Not sure if I made this clear before, but we make close to 83k a year before taxes, after taxes we take home around 60k. I think we will be fine spending 350k on a home, especially since it is so close to what we are already spending on rent and still being able to save over 2k a month.
Hi Erkia,
Are you planning on going through a bank or other financial institution to get a mortgage? While your finances and lifestyle choices may indicate that you are able to afford a house listed at $400,000, the bank may not necessarily approve you for a mortgage of that amount. Many different factors are considered when applying for a mortgage, and while you have no debt, there are other items that could negatively effect your pre-approval amount.
Also, if you are not planning on going with a mortgage from a third party, I recommend that you do not make the monthly payments to your inlaws directly. Treating them as the bank in this situation will cause many other issues and could negatively impact your credit.
DIY & Home Decor Blog
I assumed you meant 60000 gross, not net. When I owned a house I made 65000 gross, so about 43000 net. That was hard with a mortgage for 155000, and my interest rate was 6.5 (I bought before the market crashed and interest rates went down.) I had no debt, didn't own a car, walked to work and put money in savings every month.
I guess if 60000 is your net, you'll probably be fine financially. But if you've never owned a house before, just be prepared for unexpected costs. Things break, things need upgrading and you don't want to be too poor to fix them.
I still think buying from family is a recipe for bitterness and stress, but you have to weigh that one out for yourself. My own DH didn't believe me until his whole family hated him! Hope it goes better for you!