Q. My sister and I both own our dad’s home. He died last year. I want to move into the house and she wants to sell it. I can’t afford to buy it. What can I do?
— Ready for a fight
A. This kind of situation is quite common, and it’s the kind of issue that could have been avoided with proper planning.
To answer your question, we’re going to assume you and your sister have equal ownership of the home and that the title is in both of your names.
The cleanest solution is to buy out your sister’s half of the property, said Andrew Wang, senior vice president of Runnymede Capital Management in Mendham, New Jersey.
He said the first step would be to have the house appraised by a professional appraiser.
You said you cannot afford to buy the home, but is there a chance that you might qualify for a mortgage loan for half of the appraised value? If not, there are a couple of other options to consider, Wang said.
One, your sister could lend you the money.
“Rather than your sister giving you the cash, she could deed her interest in the house to you in exchange for a promissory note whereby you agree to pay your sister a monthly amount, including interest over an agreed period of time,” Wang said. “You would need to agree to the terms of the sale.”
Additionally, you would sign a deed of trust to the property giving your sister the right to foreclose on the house if you were to become delinquent on the loan, Wang said. Under this arrangement, you could deduct the mortgage interest but your sister would have to report the payments as income on her tax returns.
Another option, Wang said, is to find a friend or relative who could assist you; either by lending you the money or by going on the title with you, you could apply for a mortgage based on their financial strength.
You would need to work out the terms under a partnership agreement to protect all parties in case circumstances change in the future, he said.
Finally, be advised that if you and your sister cannot reach an agreement about the house, your sister has the right to file a partition action in civil court to have a judge set a price for the house, Wang said.
“At that time, you would be forced to either to buy your sister’s share or sell the property for the court-approved price,” he said. “That is, in the latter scenario, the house would be sold and the proceeds divided equally between you.”
He recommends you attempt to maintain excellent communications and limit the emotions with your sister on this matter.
“There are few winners when expensive legal fees are involved,” he said. “I hope that you and she are able to reach an amicable outcome. As the saying goes, blood is thicker than water.”
[Editor’s Note: If you are thinking about applying for a mortgage to buy a home, it’s a good idea to check your credit ahead of your search. A good credit score can help you qualify for the best terms and conditions on the loan and make the purchase more affordable. You can check you credit by pulling your credit reports for free each year at AnnualCreditReport.com and viewing two of your credit scores, updated every 14 days, for free on Credit.com. If it’s looking lackluster, you can improve your score by paying down high credit card balances, disputing errors on your credit report and limiting new credit inquiries.]