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Old 09-07-2017, 07:59 PM
 
Location: rural DE
1,275 posts, read 341,772 times
Reputation: 2277

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Any CPAs on this forum, sharpen your pencils. Here's the situation: my sister and I inherited a house. It's worth about $150,000 and we agreed between us that I would purchase her half for $75k. However, when we got together with a lawyer to work it all out, she announced that she wanted to be paid in one lump sum. She absolutely couldn't take payments because then she would have to charge me interest and it would be so complicated blah blah blah. I was stunned because over the years I have lent her plenty of money now and then and the thought of charging my sister interest never crossed my mind.

So now I want to pay her with a lump sum MINUS the amount of interest I would have earned on the money if it was still in the bank. So it's a math problem: 75k, 20% (15k) down, 60k in a bank account earning .95% interest. If I took out $500 a month, every month, for 10 yrs, how much would be left when I made the last payment? That would be the earned interest amount I would lose paying a lump sum.

How do I figure this out?
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Old 09-07-2017, 08:26 PM
 
15,802 posts, read 9,929,103 times
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Well 60k in a savings account earning 0.95% would only be 570.00 annually and you'd only run at the 47.50 a months full rate for the first month in your payment plan, so the real question is is it really worth it? And would you expect an interest free 10 year loan for 60k? Would you offer your sister the same terms?
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Old 09-07-2017, 08:27 PM
 
Location: Florida
3,065 posts, read 2,353,700 times
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Look for a mortgage calculator in Google.

If you paid 500 plus interest you would pay about 2,800 dollars.
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Old 09-07-2017, 10:48 PM
 
Location: rural DE
1,275 posts, read 341,772 times
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Quote:
Originally Posted by Lowexpectations View Post
Well 60k in a savings account earning 0.95% would only be 570.00 annually and you'd only run at the 47.50 a months full rate for the first month in your payment plan, so the real question is is it really worth it? And would you expect an interest free 10 year loan for 60k? Would you offer your sister the same terms?
She's my sister. There's nothing she's ever needed that I haven't helped her with.
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Old 09-08-2017, 08:00 AM
 
207 posts, read 76,896 times
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That move might turn things nasty but maybe you think they have already gotten to that point. I don't blame her for wanting the money in one lump sum as that is what she would receive if you sold the property to someone else. Perhaps you can point out to her that if you sold the sell costs could come to as much as 8 to 10% of the sell price.


My suggestion would be talk with her and settle the terms in writing before going back to the lawyer. I suggest you start with something along the lines of "You asking for the money upfront was unexpected but understandable. Why don't we get an appraisal on the home and I will purchase your portion at 50% of the appraised value minus realtor commissions". ie. $150k sell price minus $9k commission (6%) comes to $141k so you would owe her $70,500.


The terms of how you pay her are also negotiable but I suggest your getting a loan or paying the cash upfront which would be the least complicated. Be prepared for her to reject the offer and at that point it may be best to just sell the property and move on with your lives (hopefully with no hurt feelings). It can be tough to come up with something everyone feels is fair.
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Old 09-08-2017, 11:34 PM
 
Location: rural DE
1,275 posts, read 341,772 times
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Quote:
Originally Posted by Grumpty View Post
That move might turn things nasty but maybe you think they have already gotten to that point. I don't blame her for wanting the money in one lump sum as that is what she would receive if you sold the property to someone else. Perhaps you can point out to her that if you sold the sell costs could come to as much as 8 to 10% of the sell price.


My suggestion would be talk with her and settle the terms in writing before going back to the lawyer. I suggest you start with something along the lines of "You asking for the money upfront was unexpected but understandable. Why don't we get an appraisal on the home and I will purchase your portion at 50% of the appraised value minus realtor commissions". ie. $150k sell price minus $9k commission (6%) comes to $141k so you would owe her $70,500.


The terms of how you pay her are also negotiable but I suggest your getting a loan or paying the cash upfront which would be the least complicated. Be prepared for her to reject the offer and at that point it may be best to just sell the property and move on with your lives (hopefully with no hurt feelings). It can be tough to come up with something everyone feels is fair.
I did talk to her and tell her it was a hardship giving her the money up front and I explained about losing the interest income, but we got to the lawyer's meeting and she just wanted what she wanted. I live in the house since my sister didn't want it and we agreed on the price before I moved in. I was asked by the lawyer if I had made any improvements. I replaced the carpet with vinyl and replaced the missing washer, dryer, and refrigerator, and put a deadbolt on the door. At which point my sister started saying she didn't feel replacing the 18 yr old, dog-smelling carpet had been necessary and she wasn't going to pay half of $20k in repairs she hadn't agreed to. The amount I spent on back taxes, flooring, appliances, new lock, didn't amount to half of that, so yes, I just felt the remarks were uncalled for, as was the attitude. I didn't buy things with the idea of her paying half, I bought what I could afford to solve problems and only answered the question I was asked, so I was a little stunned at the response.

Thanks for your thoughtful response and I do intend to just get it over with. You're right, and the other poster who asked if it was worth it. It's not.
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Old 09-09-2017, 05:57 AM
 
1,207 posts, read 1,523,883 times
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My parents have arranged that if something should happen to both of them, that the property they own will be sold and the proceeds to be divided equally between my brother and myself to avoid a situation like this.
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Old 09-09-2017, 07:30 PM
 
Location: rural DE
1,275 posts, read 341,772 times
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Quote:
Originally Posted by arrieros81 View Post
My parents have arranged that if something should happen to both of them, that the property they own will be sold and the proceeds to be divided equally between my brother and myself to avoid a situation like this.
My father put names on his money, but did nothing about the house for whatever reason. My stepmother never checked the deed or filed my father's death certificate with the county, which would have kept the house in her family. So thank your parents when you get the chance.

I've had older friends tell me their kids went wild fighting over money to the point they didn't recognize them if, say, their ex-husband died. They were as shocked as I am about how it makes people behave.
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Old 09-09-2017, 07:39 PM
 
1,207 posts, read 1,523,883 times
Reputation: 1123
Quote:
Originally Posted by NYC refugee View Post
My father put names on his money, but did nothing about the house for whatever reason. My stepmother never checked the deed or filed my father's death certificate with the county, which would have kept the house in her family. So thank your parents when you get the chance.

I've had older friends tell me their kids went wild fighting over money to the point they didn't recognize them if, say, their ex-husband died. They were as shocked as I am about how it makes people behave.
It seems that your sister is really hurting for money if she's getting that anxious and defensive?
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Old 09-10-2017, 12:16 PM
 
Location: rural DE
1,275 posts, read 341,772 times
Reputation: 2277
Quote:
Originally Posted by arrieros81 View Post
It seems that your sister is really hurting for money if she's getting that anxious and defensive?
She makes six figures. And her husband works and has VERY good medical insurance.
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