Best way for trio to hold title

Ownership, occupancy rights upon death are key issues

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Oct. 19, 2009

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Ownership, occupancy rights upon death are key issues

Benny Kass
Inman News

DEAR BENNY: I live in Iowa while my sister and her husband live in Florida. We want to buy a home together in Florida. They will pay for 50 percent of the home and I will pay for 50 percent. We will all be listed on the deed. What is the best way to hold title to the property? It is our intent that should any of the parties involved die, anyone left should have a right to live there for the balance of their life. What is the best way to designate how the property transfers upon the death of the last party involved? --Mickey

DEAR MICKEY: I don't practice law in Florida, so my answer has to be general in nature. You should consult with an attorney who practices in that state. Oversimplified, I recommend that title be held as follows: sister and her husband as tenants by the entirety as to half of the property and as tenants in common with you as to your half.

This way, if you die first, your last will and testament will provide guidance as to how you want your half to be distributed. You could make your sister and her husband the beneficiaries, or you could decide to give your share to a third party. If either your sister or her husband dies first, the survivor of that marriage will own the entire half.

As for allowing the last surviving party to remain in the house, under my approach that last survivor will still own half of the property, and will thus be allowed to remain in the house until death.

DEAR BENNY: I saw a property advertised as a short sale for $150,000. I submitted a contract to purchase the property at the asking price. My offer was then countered by the seller/lender with an increase of their price to $175,000. When I expressed surprise to the Realtor, the response was that I should consider the short-sale process as more of an auction, with the initial asking price just a means to get the bidding started. This runs contrary to my understanding of contract law. Please shed some light on this please. --Joseph

DEAR JOSEPH: The law is clear that an advertisement is not an offer, but merely an invitation to make a bid.

Contract law requires three elements: an offer, acceptance of the offer, and consideration.

You made the offer of $150,000. The bank/seller had three alternatives: accept, reject or counter your offer. The bank opted for the latter. Now you have the same three choices.

Once there is an offer that is accepted, there must be consideration to make it a binding, legal contract. Usually, the earnest money deposit, regardless of how small, is that consideration. But, for example, if the seller takes the property off the market, that could also be considered "consideration" even if there is no earnest money deposit.

DEAR BENNY: I thought I would add to your answer regarding the reasons to use a reverse mortgage as a last resort. As you know, the amount of money you can access with a reverse mortgage is determined by the appraised value of your home as well as the age of the youngest person in the household. Obviously, the longer you wait, the older you will be. Since we have gone through a protracted decline in values, I feel that the longer someone waits, the higher the appraised value of the home will be.

Thanks for taking the time to write this column. I may not always agree with you, but I'm always informed. --Bob

DEAR BOB: I'm always glad to hear from readers whether they agree with me or not. Your comments about reverse mortgages are right on point. The appraisal industry is going through difficult times now, and from my experience, appraisals are more conservative than ever. So not only does the depressed market in many parts of the country impact on the amount of money you can tap through a reverse mortgage, but low (conservative) appraisals compound this problem.

I don't oppose the concept of a reverse mortgage, but maintain that it should be considered only as a last resort -- and after you carefully review and study all other alternatives.

DEAR BENNY: After noticing some of the lowest interest rates in years as well as the dearth of foreclosed and available properties, I have encouraged two of my younger friends to become first-time homeowners. Both have prequalified for their loans, made multiple offers and finally found a property (one a single-family home, one a condo).

Unfortunately, both are finding that even though negotiations have begun regarding terms of purchase, the bank that now owns the property is moving at an extremely untimely pace. Weeks of constant calls go by with no moving forward. Their real estate agents tell them it is the bank that is doing the foot-dragging. Why would the bank do this and how can my friends expedite the process? --Michelle

DEAR MICHELLE: I am not a fan of banks, but certainly can understand their position on short sales. First, as you suggested, banks are faced with many, many defaulting loans. I suspect that last year many banks laid off a lot of employees and are now short-handed and cannot handle the volume.

Second, no one -- especially banks -- wants to lose money. As you know, in a short sale the bank will accept a sale of the property and will not get the outstanding mortgage paid in full.

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