Legal Question in Real Estate Law in California
Earning Equity
My parents helped me and my wife purchase a house in 2001. They re-fi'd there home to help with our 10% down payment. They put $24,450 towards our $237,500 house as an ''investment''. The original verbal agreement was that we would give them 50% equity once we sold the house. They refused to make a written agreement. They are currently on the Deed. Now that we want to re-fi ourselves, we need to remove them from our deed. Now they want a written agreement stating we will give them $25k plus 50% equity and we must sell or buy them out in 5 yrs. or less. Is this legal. I think they should only get 50%, not both. And we agreed to no other terms upon the purchase/sell. They refuse to sign the deed without this agreement, and we will be out all the costs associated and loose out on the lower interest rates. Our mortgage is to be lowered by $300 +.
4 Answers from Attorneys
Re: Earning Equity
Your parents are on pretty solid ground. They are the record or legal owners, from what I gather. In addition, it looks as though they paid 100% or close to 100% of the down payment and closing costs. That would make them 100% equitable owners under the principle of "purchase money resulting trust" even if you were on title. The oral agreement is legally meaningless--real estate contracts, options, etc. must be in writing. To the extent your mortgage and tax payments exceed the rental value, you might be entitled to restitution if the matter went to court. So, what they're asking is not only "legal," it's generous. At least, that's my opinion.
Re: Earning Equity
Not sure what you intend, however, it appears your parents have every right and entitlement to what they are asking. They were generous to you and your wife. If you'd like to discuss further, please call 800-685-6950 Don Holben
Re: Earning Equity
I agree with the other attorneys that you have some problems. Although oral agreements regarding real estate are usually not enforceable, the courts sometimes have no option but to examine the intent of the parties when they became joint owners. I recently completed a trial determining the interests of two joint tenants on a home where there was only an oral agreement and have two other similar cases pending now.
If you can't reach an agreement with your in-laws, you may be forced to buy them out or file a partition action in order to sell the property. We would be happy to provide you with further assistance on both negotiating a resolution or, if necessary, filing a lawsuit.
Re: Earning Equity
If I am reading this right, they want a written agreement that says that when you ultimately sell the house that they want to receive their original investment of $25,000 back, plus 50% of the equity. Furthermore, the house either needs to be sold in 5 years or you buy them out in that time.
If this is correct, I don't see what you are complaining about. I prepare numerous equity share agreements such as this, and they always involve the return of the investment to the one who put up the money, along with a percentage of the interest.
The way you want to approach it, if the market went up $15,000, the total equity would be $40K, and they would receive only $20K. While I agree that this agreement should have been done prior to you buying the house, it is actually the way an equity share normally works.
If the house is now worth $300,000, you have one half of the difference between the original selling price of $237,500 and $300,000. That means that you made $30,000 on a home that you would otherwise been unable to purchase.
I think you should 1) be grateful to your in-laws for helping you to do something that you couldn't have done yourself, and 2) learned that everything should be in writing up front.
The bottom line is, this is how it normally works, and you shouldn't be complaining.
Related Questions & Answers
Looking for something else?
10,200 active attorneys ready to answer your legal questions today.
Featured Attorneys
Earn additional revenue and grow your business.
