Ideas needed

[shooting star]

When I was 23 my father assisted me in purchasing a house. Which I live in.

The house has a mortgage on it for $140K and is worth about $240K.

My father's mother recently died and he needs the money he lent to me back so that he can buy her house from the estate.

I owe him a total of $150,000 for a car that he bought me and some other things as well over the years. Where he was happy to let me pay the debt off over a 15 year period he now needs the money quickly.

We are talking about selling the house - although this will only realise about $100K (less after commission is paid).

If we spent some money on it about $15,000 we could possibly get $170K for it - but no guarantees on that due to the slowing of the market. We will definitely get $140-150K for it. (so am not sure that it is worth spending the extra $15,00K

My challenge is - how do we set up the deal to give him $150,000.

I did consider wrapping the house - but do not know enough about wrapping to confidently propose this.

I would ultimately like to keep the property and rent it out or receive some sort of income from it as it is in a fairly high capital growth area and will double in value in the next few years.

The solution has to be relatively simple - as my father is old and cannot come to terms with wrapping and joint ventures etc. If I do the deal - all he wants is the money. He does not want the hassle of the the wrapping deal. Whatever solution I choose has to have the ability of being completed prior to christmas.

If anyone has any ideas on how I can do this deal please let me know. I have to make some decisions on this by the end of the week.


Thank you.

Shooting Star

 

[Kristine..]

Shooting Star

Why can't you simply finance the house yourself?

Why sell it at all?

It is your Principal Place of Residence - apart from any other consideration, if you sell it you have to find somewhere else to live.

If you think you may not qualify for a Bank loan, there are a number of brokers who contribute to the Forum - Rolf is one of them.

If you are in Melbourne I am happy to give you the contact number for a Broker I've used a few times with very good results.

Only sell as a last resort.

Cheers

Kristine

 

[geoffw]

SS,

Forgive me if I have not understood.

Why doe she need the full cash from his house to buy his mother's house?

He's got $100K equity. He could borrow to 80% of his property. So he would have about $50K to borrow to but his Mum's place.

If you spent the money to improve hisplace you might be able to borrow more.

If you have some property youself, and not just cars etc you may be able to act as guarantor for his Mum's property (in case he doesnot have equity or servicability himself)

 

[shooting star]

Under no circumstances does he want to borrow. We have had some heated discussions about this.

He is from the old school and wants to pay cash.

If anyone knows about wrapping could they tell me if it would be possible to wrap this property?

Thanks for your responses so far they are helpful.

Shooting Star

 

[Mike]

Hi Kate,

Firstly, forget wrapping your house. Wrapping is a form of vendor finance which means you are allowing somebody to take possession of your home and they will give you a small deposit up front, then pay regular instalments to cover your mortgage payments plus a bit of extra cashflow for yourself. You won't be able to get a cash lump sum until the buyer can get full funding from a bank which could take years.

Secondly, it is unreasonable that your father is calling in the loan so suddenly which will cause a lot of hardship to yourself, not to mention the loss of capital when your house is sold. I suspect you may even have borrowed against the equity in the house for some recent joint venture deals. If so, will these plans be jeopardised?

On the other hand, your father has not given an overriding reason to buy his moms house. Could you clarify something for me? How has the house been treated in the will? When you say it is part of the estate, are you saying that all beneficiaries are entitled to receive a portion of the proceeds of the house when it is sold? Why then does your father want to buy it? Why not sell it on the market and divide the proceeds according to the will?

My best offer to your father would be this:

You are not selling your home now because you are unlikely to get full value for it due to unfavourable market conditions. Beside, the house suits your particular situation at the moment.

You may be able to afford to borrow a lump sum to give him but the amount will be determined by your ability to service the extra loan on top of your current debt to your father plus the existing mortgage payments.

If your father wants to buy the estate house that badly then your lump sum should enable him to use it for a deposit and the rest he borrows. What does he plan to do with the house when he buys it? If he rents it then the rent should cover most of the interest on the mortgage loan.

Tell him his mortgage will only be temporary because as soon as market conditions are in your favour again you will sell your house and clear his debt. Your father can then clear the loan on the estate house. The scenario I outlined means that your father is not put in any financial hardship. But you will be financially stretched until your house is sold.

Regards, Mike

 

[shooting star]

thanks for your reply Mike.

My father WILL NOT UNDER ANY CIRCUMSTANCES take out a loan on to buy his mother's property. Trust me I have asked him to do this more than 10 times.

I do not know the wording of the will but what I do know is that there are 4 beneficiaries and one in particular is wanting absolutely everthing which is making all the other beneficiaries touchy. My father lived with with her to look after her for the last years of her life. He therefore does not want to leave the house.

I cannot refinance the house myself because there is not enough $$ in it to do so. I will still owe him money. I think that at an real push I may be able to get $300K for the house - but it will have to look absolutely immaculate and will cost some $$.

Any ideas on how I may be able to get $300K (other than advetise to the southern states - which is what some people do).

Thanks

Shooting Star

 

[handyandy]

Hi Shooting Star

As geoff has mentioned what is the amount of money required to buy out the other benificiaries of the will. Why does it require the full $150k owed?

If it is less than the $150k (more like <$100k) then you may have a possibility of extending your current mortgage and make arrangements to keep paying him for the outstanding.

You also mentioned that you were to pay him over 15 years in which case do you still owe him $150k or less.

What I am getting at is trying to identify any movement which would allow you to make some deal other than a simple $150k payout which on such sort notice is unfair to say the least.

Cheers

 

[Mike]

Hi Kate,

You didn't say in your first post that your father was living in the house which makes a big difference to how the issue is handled. Obviously he doesn't want to leave the house which has become his home. How long has he been living in the house? I ask because if someone has been living in a house for a number of years they may be able to claim "possessory title" to the property.

At the very least, it seems your father has a very strong case to contest the will to receive major ownership rights to the property because he is a beneficiary and the house is his home. He is also in a strong bargaining position to make terms that suits his financial situation. So rather than bother you he should get a good estate lawyer and fight to take legal ownership of the house. If he has to pay people some cash then he should make the terms payment by instalments over, say, 5 years.

That way you can setup a line of credit to pay the instalments to buy yourself some time to sell your house if necessary and pay off the debt to your father.

Regards, Mike

 

[asy]

Hi Mike!

you said:

if someone has been living in a house for a number of years they may be able to claim "possessory title" to the property

Are you meaning acquisition under the adverse posession legislation?

If you are, Kate's father may not be entitled to apply.

The rules of adverse posession are quite clear in that the applicant must have been in sole posession of the property (or piece of property) for 15 years and must have done so WITHOUT the permission of the owner of the property (The owner must not have agreed nor disagreed with him using the property).

For instance, where a fence has been in the wrong place for 20 years and neither party were aware of the misplacement, the one who was using the land in question would be entitled to claim.

however, where a fence has been in the wrong place for 20 years, and was originally put there because the owners of the land agreed to alter the boundaries for a reason, and one owner agreed to allow the other owner use of the property, there is no entitlement to adverse posession.

Thus, since Kate's father was living in the property at the behest of the legal owner, this means he is not entitled to claim the title under adverse posession.

(Please remember I trained in VIC, but I will search for the legislation as it applies to BNE and post again)

asy

 

[Jakk]

G'Day All

Originally posted by shooting star
....... My father lived with with her to look after her for the last years of her life.
He therefore does not want to leave the house.

Seems to me that the will did not make adequate provision for your fathers accomodation requirements as he made major lifestyle changes to look after his frail mother in the last years of her life.......

Originally posted by Mike
......At the very least, it seems your father has a very strong case to contest the will
to receive major ownership rights to the property because he is a beneficiary and the
house is his home. He is also in a strong bargaining position to make terms that suits
his financial situation. So rather than bother you he should get a good estate lawyer
and fight to take legal ownership of the house. .

forget about refinancing right now, definitely get your father to see a good estate lawyer as Mike suggests.......seems like there is a very good case to modify the terms of the will, even if there is only a chance of delayment that would allow your fathers occupation of the property to continue until a solution can be worked out.

Methinks it's time for one of our esteemed learned legal people on this forum to tip in a opinion on this matter.

regards

 

[asy]

Kate,

Firstly, let me offer my condolences on the passing of your grandmother...

with respect to my last post:

Where are you?

I assume you are in BNE, by previous posts, this might interest you:


http://www.austlii.edu.au/cgi-bin/download.cgi/download/au/legis/qld/consol_act/loaa1974226.rtf

It's the Adverse posession (Limitations of Actions) legislation for Queensland.

These are the interesting sections:

Actions to recover land

13. An action shall not be brought by a person to recover land after the expiration of 12 years from the date on which the right of action accrued to the person or, if it first accrued to some person through whom the person claims, to that person

So, in Queensland, it's 12 years.

(14) (3) Where a person brings an action to recover land, being an estate or interest in possession assured otherwise than by will to the person or some person through whom the person claims by a person who on the date when the assurance took effect was in possession of the land or, in the case of a rentcharge created by the assurance, in possession of the land charged and no person has been in possession of the land by virtue of the assurance, the right of action shall be deemed to have accrued on the date when the assurance took effect.

This means that your dad's right to claim begins on the date that his mother died.

19.(1) A right of action to recover land shall be deemed not to accrue unless the land is in the possession of some person in whose favour the period of limitation can run (“adverse possession”) and where under the provisions of this Act such right of action is deemed to accrue on a certain date and no person is in adverse possession on that date, the right of action shall be deemed not to accrue unless and until adverse possession is taken of the land

So, he has to be in possession of the property, which he is.

Acquiescence

43. Nothing in this Act affects the equitable jurisdiction of a court to refuse relief on the ground of acquiescence or otherwise.

this means that the court can still refuse a claim on the basis that he had the authority of the owner to be on the premises..


Having said all this.

There are some legal ppl on the forum. Please post...

I seem to be the one constantly answering the legalese type questions, and I am not legally trained!!!

You are welcome to put any disclaimer you like on your posts, and I am sure that I speak for all of us when I say that we all understand that posts are only an opinion, and not legal advice.

Please post


I think that you are in a difficult situation, will your dad go halves with you in the house? for instance, say the house is worth $200k... (Since you say he wants $150k to buy it ,and only needs 3/4 of the price being that he gets 1/4 in the will).

You have 100k equity in your home.

IF he will go halves, you draw 50k out of your house to give him the balance of his half of the price of the house, and you use the other 50k as a deposit on your half of the house... Then you get a loan for the other 50k. This way you get to keep both houses...

I guess the other option is getting a personal loan for 50k?

You are between a rock and a hard place. I really hope that you can find a solution. Let us know how it goes... Please... We will all keep trying to think of other ways to go...

In the interim, I hope this helped, Kate...

asy

 

[NigelW]

Originally posted by asy


this means that the court can still refuse a claim on the basis that he had the authority of the owner to be on the premises..


Having said all this.

There are some legal ppl on the forum. Please post...

I seem to be the one constantly answering the legalese type questions, and I am not legally trained!!!

You are welcome to put any disclaimer you like on your posts, and I am sure that I speak for all of us when I say that we all understand that posts are only an opinion, and not legal advice.

Please post

asy

you're doing a pretty good job in directing people to relevant legislation, from which they may draw their own conclusions . But things are never as straightforward as they seem in law (as in life I suppose). Perhaps some reasons that some of the "legal" people are a bit reticent to post on such matters are:

1) insurance
2) if an employed lawyer whether or not they retain a right of private practice
3) disclaimers are of limited effectiveness in many circumstances
4) people like to sue lawyers despite comments perhaps being made in a purely social setting

Perhaps in matters accounting and tax issues are more straightforward...(but then our resident accountants probably don't own anything anyway...the trust may be another matter though!)

perhaps not the reasons we'd like, but at least a plea in mitigation!

N.

 

[asy]

thanks Nigel!!

Plea accepted...

However, will you please do me one favour, if I do post anything that you know to be incorrect, will you either correct me or Private Message me so I can correct it. Please

thanks

asy

 

[shooting star]

You guys are great.

Thanks for your assistance. Problem solved.

He is finally seeing sense in relation to the bridging loan.

Thanks

Kate

 

[TheBacon]

Family

Mixing family with money.

Works for some, has worked for me. But I wouldnt recommend it to anyone. If it goes bad you can lose a lot more than money.

TheBacon

 

[Mike]

Hi TB,

I can't see a problem if the terms and conditions are recorded in a statutory declaration signed by a Justice of the Peace. Imagine if your bank suddenly wanted to call your IP loans in arbitrarily like Kate's Dad with her loan. Wouldn't that cause untold financial hardship and cause you to never do business with that bank again? It can work in a family situation as long as both parties take the agreement seriously.

I'm in a similar situation myself and have a loan to payback to my father and am doing a lot of extra shifts right now to pay back the loan earlier than the agreement specified. The agreed term was 10 years and the loan started in 1998. The loan was to help purchase my PPOR which I used it for. However, after I began buying IPs he suddenly regretted giving me the money! He thinks the only winner in property is the banks and while he has this distorted POV I've decided to pay back the loan in large instalments so that he can see the money coming back. I think by the end of next year the debt should be cleared 5 years early.

If he regrets it there is no sense in dragging it out and causing friction between us.

In my opinion a loan is a loan and I used it for the purpose it was intended to be used for. Just because I then used the equity in the PPOR to by IPs should not be his concern because the loan is going to be repaid anyway.

Regards, Mike

 

[geoffw]

He is finally seeing sense in relation to the bridging loan.

Hey, way to go Kate! Well done (and thanks for a real name).

But, some caution here as well.

a. It is a bridging loan. Generally only used as a temporary loan (I think) when acquiring one property and selling another, when the periods don't overlap much. So it may be a short term solution, and perhaps a little more expensive than other solutions.

b. You still owe him $150K. It sounds as if there may be some resentment there, just when he needs some benefit back from the loan. He might be appreciating some accelrated payback period now.