Betty Jo was in a real mess and, after reading her e-mail, I knew I had the story for my next column. The names and places have been changed but her situation is a real-life example of tragedy, bad luck and poor decisions.
Betty’s husband Dick had always wanted to live in the mountains so after his retirement they moved to remote Inyo County where in 2006 they purchased a large home for $600,000. Four years later, Dick was dead, leaving Betty Jo stuck with a house that was worth half of what they had paid and living alone in a place where she didn’t want to be.
She writes, “My question to you is what can I do now? I’m alone in this large house, fully landscaped, and everything keeps breaking down and I can’t find dependable people to help, plus it’s costly. The winters are really bad with unreliable snow removal people and a lot of my family and friends are over the summit in Placerville and Sacramento. I have no family here and few friends.”
Stuck with a big house in a remote location was just one of her many problems.
“My mother passed away six weeks before my husband and my brother and I are now co-owners of a house in Sacramento presently used as a rental. We are undecided about what to do with the property. I have thought about buying him out and living there but he isn’t ready to sell and he says he doesn’t have enough money to buy me out.”
In addition to a sibling issue over mother’s inherence, Betty Jo had problems with her own kids.
“Several years ago Dick and I co-signed a loan for our daughter and her husband in order for them to buy a home. Now, they’re walking away from the house. The lender has filed a Notice of Default against us. Should I bring the payments current?”
Betty Jo was losing money with her other investments as well.
“After Dick passed away our financial advisor invested the money from his life insurance policy into the stock market. It looked like the right thing to do at the time but now I am not so sure, watching my only savings slowly disappear. Do you think I should take the money out and use it to buy another home closer to my friends and family? Then I can hold off on selling my home here and wait for the price to go back up. What do you think about buying a cheap foreclosure that needs work and fixing it up?”
“Dear Betty Jo,
Thank you for your confidence. Every situation is different and has many variables. It is your life, money and family. My advice is not based upon legal or tax consideration but only an opinion of a fellow traveler on life’s journey.
You need to move as soon as possible. You have no business living by yourself in a remote location without family and friends. Call an agent in the area and have them bring a For Sale sign with them. Then start packing and get out of there before the snow closes the road. You don’t have enough time to wait around until property values fully recover.
Don’t consider renting. Lone Pine isn’t a hot rental market and, besides, you don’t want to be an absentee landlord. Big custom homes are rarely good rental investments. The home will never be in better condition than what it is now. Sell for what you can and move.
Do not consider buying a home that needs extensive repairs or remodeling. Paying a little more for one in top condition is usually money well spent. Remodeling always costs more than anticipated and devours cash or increases debt.
You need to confront your brother about your mother’s home and come to a resolution about ownership. The longer the decision is postponed, the more complicated the issue becomes. If he wants the home but has no money or available financing, you can agree to take a note or deferred payments for your share. If value is in dispute, you should both agree to hire an independent appraiser. If he agrees to sell, get an agreement in writing, have him produce a copy of the lease and have someone check out the condition of the property prior to closing.
Most prudent financial planners would not have your life savings tied up in a volatile stock market. You should be looking for selling opportunities over the next few months. You will need some of that money for a home purchase and the rest should be in more conservative investments.
Parents should never co-sign mortgage papers in order for their children to finance a home. Gifting all or part of the purchase price is preferred. You will have a foreclosure on your credit report but that’s preferable to throwing good money after a bad decision. If your kids don’t want the house neither should you.”
A few days after my reply I received this e-mail.
“You are an ignorant, insensitive person with no compassion for others. My brother thinks you are only interested in commissions. My financial advisor says you’re unqualified giving financial advice. My daughter says you have no place butting into family business. I have decided to bring her payments current and live in their house while waiting for my house to go back up in value.”
That was the last e-mail from Betty Jo.