When you make a big decision, & new info changes everything!?! (LONG)

[Lisa0825]

I'd appreciate any input y'all have on this. I'll be talking to professionals soon, but I want to put a lot of thought into it beforehand, so I will have my questions ready.

Some background info... shortly after my divorce, my mom's health declined dramatically. I ended up moving in with her to take care of her. A year later, she passed away. Throughout all of this, I found it very difficult to take care of my responsibilities. I basically spent about 5 years screwing up my life and my credit. I've finally started putting my shit back together, and making plans for the future.

I am still living in the house my mom owned. The will states that the house would be split by my brother, sister, and I, but they do not care how long I live in it, or what I do to it. It's all up to me. In addition, the deed is in my name now. It only has about 2 years left to pay on it. I started the process to see if I can get a home equity loan (despite my bad credit, since it is almost paid off), which I will use to pay off old debts and do some badly needed renovations.

I'd gotten used to this idea. I think I still need some stability for a while, so staying at the house for the near future seems like a good idea. Starting to clean up my credit will relieve a lot of stress. Once the house is paid off, I figured I'd be in good shape to go to graduate school, if not sooner.

Well, my sister sprung something on my this weekend. She told me that she will not be claiming her share of the house and she wants me to have it, because I took care of mom when my sister couldn't (because she lived in another state). So, basically, my assets have just doubled! Instead of breaking even (debts to assets), I am in the black!

Now the temptation to go ahead and sell, pay off all the debts and get back to school is really strong. I'm really uncertain though, because like I said, I've been through a lot, and sometimes feel overwhelmed by attempting to handle too much at once.

I remembered that through my company's insurance, there is a service that gives free phone consultations with professionals in many areas, and I plan to speak to a financial adviser there today or tomorrow. But for now, I just need to get my thoughts and questions together, and any input y'all may have would be appreciated as well.

About the house... I think it's close to 40 years old, in a neighborhood that went downhill, but is currently on the upswing. Several nearby houses have recently been completely renovated. My house is probably one of the least desirable on the street. I'm in a working class area. This house was recently appraised for tax purposes. I'd hesitate to post dollar figures publicly, but if anyone wants specifics to consider and give me input on, PM me and I will send the info.

DISCLAIMER: I know I can't rely on an internet message board to make such important decisions, but like I said, I wanted to get all my thoughts and questions together as I prepare to talk to some professionals about my situation. Thanks for any input you can offer:-)

[trotsky]

1. Wow, that is incredibly generous and nice of your sister.

The house is only going to get older, and unless you're willing to pump time & money into maintaining and improving it, what you will gain when you eventually sell won't change much.

I would be inclined to sell and go back to school. That's my opinion.

[Lisa0825]

2. Yes, my sister is wonderful:-)

I've been doing a lot of little improvements on my own, like ripping out carpeting to expose hardwood floors, putting in new light fixtures, replacing old light switches, painting trim, etc. But now the things that need to be done are bigger things, so I really need to stop and think before I take the plunge. Thanks for the input:-)

[radwriter0555]

3. If you're intent on fixing it to sell it you can refinance the mortgage

a very low interest loan, take a SMALL amount of equity out, do the repairs needed, pay off your debts and sell the house, so long as there is indeed a profit to be made. The idea behind the low interest loan is to keep the monthly payment as low as possible while you're following your schedule of repairs. Your goal is to sell the house as soon as possible and get the loan paid off of course.

The question then becomes, will the profit be a seriously life changing financial set up? If it's only 20 - 30 thousand, NO. That's not much money at all. In which case, take your time doing the repairs, go to community college and get your degree cheaper and pay the house off. Take in a boarder if you must... but a house is a great asset.

[Lisa0825]

6. I asked about refinancing....

but the mortage consultant said that because I only owe $9400 (the last 2 yrs on a 30 yr loan), that so much of it goes directly to principle that a lower interest rate at this point wouldn't make much difference. He felt the equity loan would be the way to go.

With my sister's share of the house and mine, I am probably looking at about $50K, and THAT IS a life changing amount to me, because it means being debt-free, rebuilding my credit, paying for college, and being able to start over, plus putting a good chunk in savings.

I can't go to a community college, because I am pursuing a graduate degree. I already have my BS. Once I get back in good graces with the student loan folks, I can apply for financial aid, but even if I don't qualify, I could probably swing at least a class per semester on my own without selling.

I guess part of my uncertainty is that I have felt tied down by the house, so the idea of having the money instead of the house is tempting. So, I figured I should just keep it and stay and see how I feel in a couple years, if I still feel like possibly moving or anything. BUT, if I am to stay, I REALLY want to improve the house to make me happier about living there.

See what I mean?LOL! I have all these scenarios and possibilities running through my head! But at least it's an all-good situation:-) I'm feeling very fortunate right now.

[CaliforniaPeggy]

4. Hi, Lisa0825!

OK, now for the opposing point of view...Hold onto the house, make your repairs and then see how things look. If the market for the house is on the upswing, then good...if not, then you can live there. Don't take on too much! And DEFINITELY talk to your company's financial advisors...they are in the position of being able to give you much more personal and specific advice.

Good luck! What a lovely dilemma to be in...

:dilemma:

[Lisa0825]

8. Yes, it is a lovely dilemma!:-)

I contacted a realtor by email just now. I think I'll wait until tomorrow to call the financial advisor. I need time to absorb it all. I think I have a problem with seeing things in black and white at times. Do I STAY or GO? Well, can't I stay and then go at anytime? I tend to see staying as some long-term committment.

Thanks for the input:-)

[Misunderestimator]

9. I agree with holding onto the house...

No better way to repair the bad credit than to make timely mortgage payments for the remainder of the two years on it.

ESPECIALLY since there are only two years left on it. FREE RENT/NO MORTGAGE... before retirement? No question what my choice would be.

[Lisa0825]

12. Well, ALMOST free... there's still tax and insurance!

But still, I feel like I've been handed a second chance in many ways.

[Misunderestimator]

17. True... but that's nothing compared to the weight of a mortgage over...

your head for the next 30 years. The position many of us are, were, or will be in.

Keep the house! Or, if you're in California, sell it to me :D

[newportdadde]

5. That is some sister.

When my grandmother died it was everyone for themselves in my family. My father grew up on the family farm, was the baby of the family and took over the farm when his father died when he was not even a teen, the only kid of 5 to stay on farm past 18 or who wanted anything to do with it.

My grandmother wanted him to have it but wanted to be fair to the others. Her old will had it said "To be split at fair market value' Of course due to the big push in the late 90s of everyone wanted a rural 40 acre plot the value of this land had skyrocketed. She wanted to change the will and had asked my uncle to help her so my father could buy it at 400 and acre, unfortunately she got sick before she could get the new will finalized.

After her death, my uncle conviently 'forgot' that conversation when the appraisal came in at 2k an acre. I watched as 4 aunts and uncles, 2 multi millionares and the other two well off as well fought over what was peanuts to them. The end result, farm was split into tracks etc. Disgusting, I haven't seen any of them in 6 years and don't plan on it in the future.

My advice is to keep the house, your sister showed a lot there. I would be afraid she would hold that against you if you immediately sold out to profit from it. That and having a paid off house as fall back is worth a lot.

[Lisa0825]

10. It's really sad when family members turn on each other.

My mom went through some of that with her sister when their mother died. My mom ended up just giving her whatever she wanted just to make peace.

My sister or brother wouldn't hold it against me. They have no attachment to the house. In fact, my brother would probably just as soon have me sell to get his portion, but since he is doing well himself, he doesn't try to rush me. I've been really thankful that neither of them wanted me to sell right away. It took me a long time to start to feel like moving on.

I know you're right about having a paid off house, and it is SO CLOSE, so that's one reason why I feel torn about the decision. So I hope the financial advisor will be able to give me some direction in making the decision that's best for my situation.

[crispini]

7. Well, since you say that you have felt overwhelmed...

I'd make sure that you have everything ready to go to grad school full time before you make the jump. In other words, don't go prematurely. Especially since the neighborhood has been appreciating ... if the house is in fairly decent shape, and you keep it up, the value will only go up. You might wanna wait, pay off all your debts with your current income stream, and rely on the house for your grad school funding.

But, hey, it's all good, right? :7

[Lisa0825]

13. That was basically my first plan...

Before my sister's generous offer, I planned to get my ducks in a row over the next two years, and finance college with the money that was going to the mortgage. It wasn't until I got $$ in my eyes that I started re-thinking! I'm not sure I would go to grad school full time anyway. I think I'd take 2 courses per semester and keep my job, because it's a good job with good benefits, and I could move up in the company with higher degree.

[seemunkee]

11. Where would you live if you sold the house? Can you meet rent

without dipping into the profit you make on the house? How much would you earn after capital gains? Di you sister sign a quit claim to the house? Does your brother want to sell? If not you will have to bring a partition suit against him to force the sale.

[Lisa0825]

14. Rent is pretty cheap down here...

There are lots of older homes near my work that have converted garage apartments, or large houses converted into duplexes. I could probably get a very cute one bedroom place for $450/mo. I know nothing about capital gains. Isn't that for pretty high incomes? My sister and I just talked about this on Sunday, so nothing has been signed yet. I imagine when I talk to the financial advisor I can find out about that. Thanks for pointing that out. My brother would probably prefer me to sell to get his share, but he is not pressuring me in any direction.

Thanks for the points to ponder! I'll be printing this out to have when I make the phone call:-)

[seemunkee]

16. Just had a thought on the capital gains

IRS rules allow you to not be taxed on the profit from the sale of your principle residence, up to $250,000. It has to have been your primary residence I believe for 3 of the last 5 years(the financial advisor should know this). If that is the case you won't have any but your brother will. Additionally when your mother died you inherited the house at the stepped up value, value at the time of her death not what she paid for it.

[Lisa0825]

18. It's way less than that...

houses on this street have been going for about $65 to 75K. Heck, my brother may end up wanting me to wait if it will affect his taxes!LOL! I hadn't thought of that!

[Greyhound]

15. Glad to hear things are starting to turn around for you

In what State/region is the house located? This will dramatically change your strategy.
Credit problems are highly over-rated, and not that hard to fix, unless we're talking about huge sums, and if that is the case, you should look at a bankruptcy. Under NO CIRCUMSTANCES allow them to attach your credit card debt (I assume this is the major source of your credit problems) to the home! Many areas around the country are still experiencing 20% - 40% appreciation, and selling is probably a mistake, especially if you're in an area that is on the up-swing. If this is your case, selling would be like walking away from 10's of thousands of dollars.
Obviously, there are so many variables to be considered, that it is not possible to get the whole picture in a BBS. Talk to your professionals, but always keep in mind that their interests may not be yours. Don't sign anything without taking the whole plan to a trusted(?) third party for analysis. If the pros won't let you do that, run, don't walk, away from them. Any legitimate financial planner has nothing to hide or fear from someone else looking at the proposed plan. Do not submit to pressure tactics, if they start ganging up on you, or saying stuff like "if you wait, this deal won't be here", or "interest rates are going up and it will cost you lots more if you don't take this today", get away from them and look for another planner.

Good luck, keep us updated. :eyes:

[Lisa0825]

19. I am about 40 miles south of Houston, TX.

My debts probably add up to about $15-17K, including my student loan.

I believe these advisers only give phone consultations, and if you need in depth services, they refer you to local contacts. So, while I'm sure they get a kick back on referrals, at least it will give me some info without having to meet in person yet.

Thanks for the input!:-)

[Greyhound]

20. $17K is nothing to get all bent out of shape about

Unfortunately, due to my abhorrence of all things texan, I don't know the houston area at all (other than it being the nastiest, filthiest, place I ever had a contract, worst 3 weeks of my life), but I've heard that the values there are still going up. The student loan people will take negatives off of your credit report, just keep going up the ladder until you get a yes. I'm inclined to say hold it. As others have said, a paid off home is quite an asset that can open lots of opportunities. If you're only going to realize $50K or so, that would be further reason to think very hard about holding on to the house for the time being.

Cheers :toast:

[Lisa0825]

21. Thanks, greyhound:-)

$17K felt like the weight of the world to me when I was living paycheck to paycheck... it wasn't worth much too me, because it wasn't cash -in-hand. Now, I'm putting things in perspective, and I'm finally feeling like I'm getting ahead!:-)

[radwriter0555]

22. If the majority of your debt is in student loans you're doing REALLY well,

heck, I know people who owe that much on a 23% credit card; your debt is at about 2% at best, which is fantastic.

Don't sell. Fix it up and ride it out. A free place to live is an amazing gift, and if you want to move out, you can rent it and cover the note. Then, once it's paid for, you have income while your asset acquires further equity.

Owning a home is great on your credit report too, a huge, huge asset for your credit report.

You'll be FINE. Keep it, fix it up, make it purdy and sit on it and go back to school. You'll get the debts paid off along the way.

[Lisa0825]

23. Thanks:-)

about 1/3 is student loans. The rest are various smaller debts. All are old. I have long since quit using any form of credit. So, I keep up with my current bills, and am working on settling the past ones.

Thanks for your input! I have a lot to think about:-)

[Kenneth ken]

24. ignore the temptation

and keep the house. You ought to discuss your plan with your brother and sister and get their agreement on your plan. I think regardless of what their opinions are, there are still legal obligations relative to the will. Besides, if you keep the house it could be a place for one or both of them to bail out to if their world falls apart, which is almost always a possibility.

Go for the smallest home equity loan you can get away with, which means you should probably get some idea of what the most-needed renovations will cost.

I think your overall plan should be to use the house as a base for rebuilding your life, but always keeping in mind you need to do right by your brother and sister, even if they don't seem to care about the house.

[Lisa0825]

25. I have discussed it a little with my brother and sister....

Both are perfectly fine with getting the loan and renovations. I haven't approached my brother with the possibility of selling, but I don't intend to do that unless I make that decision.

The loan consultant said that I could pay back any excess without penalty if I got a loan and decided to use less, so if I stick with a tight budget and come out under the estimate, I can reduce it.

I would definitely always do the right thing for my brother or sister. I couldn't live with myself if I didn't.

Thanks for the advice!:-)

[Greyhound]

26. One last thing regarding renovation

My oldest friend is an architect (~20 yrs, big custom estate stuff). When a couple comes into his office to build their home he has a standard speech, I'll save you and summarize;
it will cost twice as much as you think it will
it will take twice as long as they tell you it will
you will probably be divorced when it's finished

:beer: