Legal Question in Real Estate Law in California
My husband and I reluctantly bought a house with my parents at the very peak of the market. They were unwilling to wait as they had just moved here and wanted their own home a.s.a.p. They are the sole residents of the house and we own half each. Their half was cash ours a much bigger mortgage than we had at first anticipated. Since the purchase the market has crashed and the only salvation we can see would be for us to own this property for many, many years until we could at least break even. My parents however, want to leave their share to me and my sisters and their children. I know they are legally entitled to do this but am I justified in requesting that my husband and I be reimbursed first, for at least the initial amount we borrowed, so that we are somewhat protected. I feel that everyone else will benefit from this deal whilst my husband and I will lose, and continue to do so for quite some time. My mother says we just have to accept an equal loss but I don't see how they will ever physically experience their loss and at least they got to live in a beautiful home. We just got to pay for it. I hate to sound resentful but I don't like to see my husband's hard earned money going down the drain. Is this just a case of our having to bite the financial bullet? Is there a more fair resolution that you can suggest?
2 Answers from Attorneys
I'm having trouble with understanding just what's going on here. Why is your "half" a much bigger mortgage than you had anticipated? And why is there an "initial amount you borrowed." Is that different than the much? bigger amount you owe? Was it really bought 50/50? How is title held? Tenants in common? Joint tenants? Something else? Why are you paying the mortgage on your parents house? So you could share in the appreciation (that never happened?) This seems to be a more complicated situation under the surface of your summary description.
This all evens out if you (individually or as a couple) inherit the house. Suddenly, instead of owning a $400,000 value half interest with a $500,000 mortgage, you own all of an $800,000 house and the loan is still only $500,000. Your risk is that if your parents are upset with you, they may leave their 1/2 of the house to the SPCA or Uncle Frank and Aunt Minnie. The risk of this is somewhat lessened if the house is owned in joint tenancy (due to the right of survivorship), but remember that joint tenancies are easily converted into tenancies in common by either cotenant without the cooperation or foreknowledge of the other. You might inquire of a trust lawyer about use of an irrevocable trust to insure you get their 1/2 of the house eventually, but negotiating the parents' agreement to set one up at this point might not be easy.
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