Q: My husband is one of three heirs to a home located in Los Angeles, California.
As we were learning about the inheritance, the property was going into foreclosure.
One of the other heirs decided to sell his share of the home to a real estate guy who is outside the family. My husband and his mother, the third heir, do not want to lose the house or sell their percentages.
Are there any rules or information we should be aware of about this third party who is now our co-owner. This guy wants to buy us out but we would rather not sell.
A: It seems to me that the heir who sold should have come to you first so that you could have bought out his interests. Instead, he went and sold it to someone else, and this person wants to now buy you out. This is a fairly typical scenario.
Since the house is about to go into foreclosure, the only way to save it is to bring the payments current, and then refinance the property. Your husband and his mother should have a meeting with the new owner and have a good real estate attorney draw up an agreement for how the property is going to be managed and how the expenses will be shared.
Here are the questions you need to answer before you have this meeting: How much is the property worth? Does it need fixing up? How much would it be worth all fixed up? Is the third partner willing to put in his share? Or, is he hoping to run it down further to force you to sell?
Since you all own the property, you will have to get a mortgage with this person in order to keep it. That can be fairly dangerous. If the third owner stops making payments, it could destroy your husband and mother-in-law’s credit.
I think you should approach this investor about buying out his share. He will look for a profit. But if your husband and mother-in-law want to keep the property, the only real way to do it is to get it back under your control.
Otherwise, figure out what the home is really worth (you can talk to local agents about what they think the property is worth) and then ask your new partner to buy you out. While you don’t want to sell the house, selling may be a lot better decision than waiting to be hit by a financial train wreck.
You should also talk to an attorney about your issue; the investor can force the sale of the home by legal means. But, you may also be able to force the investor to take action if needed. It might be wise to seek legal help sooner rather than later.
Feb. 8, 2006.
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