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Support Sister?
Old 04-27-2010, 09:30 AM   #1
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Support Sister?

For your comments and advice:

I have a sister who just turned 60. At 55 she divorced her French husband because he suddenly picked up multiple expensive mistresses, lost his banking job, and generally fell apart. She came back to the U.S with about $500k in a lump, nothing else.

She bought a 100+ year old house in a far suburb of Atlanta, intending to live there and do a slow fix and flip like they had successfully done in England and France. Unfortunately, she bought at the absolute peak of the housing market, and underestimated the financial difficulty of the fixup without hubby's big salary. She needed a big down payment because of no credit history. Her ex also reneged on his promise to pay for their daughter's college, so she had to fund that. No way to get any money from him now, but daughter got her degree and is teaching in Hanoi.

She finally got a job about 2 yrs ago in a small museum that paid next to nothing, and was going down the drain anyway. She had a long distance romance with a divorced guy in California and eventually he invited her to come live with him. Last summer she put the house up for sale, packed some stuff into her car, and drove to CA. Unfortunately, it turned out that the new guy was not divorced, just separated. With three other girlfriends. That lasted for two weeks.

Realizing that she needs to get a serious job, she drove to Washington DC and has been staying with friends for six months while looking for a job. She wants to be an event planner or interior designer, things she had done when working 25 years ago. She has found absolutely nothing during this time, but I think she has been trying for jobs that either don't exist or she is under-qualified for now.

We knew her money was running low, but last week she advised that she is down to her last thousand dollars. She's on her way back to the house, going to retrieve some personal effects, see how the realtor is doing, try again for a job in that area.

Last week she also asked me to cover her mortgage for three months, hoping the house will sell in the Spring so she can walk away with at least a little money and a credit rating. She did not discuss how she would buy food, medicines, etc during this period with only a thousand dollars.

Obviously, she has done a horrible job of managing her money. Her lack of success in finding a job, tells me she is either not trying hard enough or trying for too nice a job. In order to suppor the mortgage, she'd probably need to earn about $75k.

I refused to help with the mortgage, saying that would be throwing good money after bad. Just hope the house sells before the foreclosure process takes it. She made the April 1 payment, but that's the end. I had her detail her monthly non-mortgage expenses, she came up with about $1,300 which seems reasonable. I told her we would supply that money for three months, but after the first month she would need to get some kind of job for at least 20 hrs per week, and send us copies of the pay stubs. No job = no money from us. Walmart and Burger King should be on her list.

This is a terrible comedown for a woman who was a French barronness, living on a 5 acre country estate in southern France. But neither we nor anyone else can support her in "the style to which she has become accustomed", so she'll need to tough it out.

The one question remaining is, would it make sense for us to cover her mortgage for three months while hoping the house sells? That would be ~$2,200/month, to be repaid if the house gets sold, she would be honest about that. Purchase price was $419k, and she put about $50k into improvements. Initial listing last summer was bizarely high at $555k, soon dropped to $500k, then $450k, has been at $399k for the last few months with an extra $5k commission if it sells by end of May. She owes about $270k but in this terrible market, I suspect that a quick sale would require dropping the price to $300k and then she wouldn't get anything for herself. Hence, my initial refusal to subsidize the mortgage. But maybe I'm wrong...
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Old 04-27-2010, 10:11 AM   #2
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I can't tell what the place is really worth. Even if it is 350,000 she gets chunk of money in her pocket. A discussion with the realtor is in order, maybe even spring for an appraisal.

If there is equity you could get a second mortgage to secure any money you pay on the first. Going into foreclosure likely will negatively effect the value.
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Old 04-27-2010, 11:05 AM   #3
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Sorry for your predicament ! It sounds like your sister is still not into her new reality . Let's face it in this economy event planners or interior decorators are probably not making much money . The thought of getting a $75,000 job with no real experience is probably a pipe dream . I would give her $10,000 and tell her that is it and figure it out . I would not get into a monthly thing with her because she'll drag it on and you will be aggravated . The sooner she realizes her baroness days are over and she needs to figure it out the better . Hope this does not sound too harsh but I've seen lots of women in this situation refuse to get real with their new circumstances .
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Old 04-28-2010, 05:03 AM   #4
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Wow. She's obviously got to get out from underneath the house - either selling or renting. Supporting her in any way to continue living in the house unfortunately only supports the "false reality" she's been living.

If I were 55 with only $500k and no recent employment history - I would be in "extreme bunker mode". I'm probably an extreme the other way - but I am amazed how someone in that situation could commit $400k for a house.
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Old 04-28-2010, 05:20 AM   #5
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If I were faced with a similar situation, I'd be inclined to offer some help if doing so would not put either myself or my children at risk. Like you, I would make it clear that there are limits and either a one time lump sum or (if she has difficulty watching the pennies) monthly payments for a limited period. I would also cover medical costs if needed (but would not necessarily say that in advance of the need arising).

There are two things I would not do under any circumstances:

1. sign anything that would involve taking responsibility for anyone else's debts, rent payments etc

2. allow them to move in with us.

This may sound a little hard, but my perspective on this issue is probably tainted from watching some of my mother's siblings go from being comfortably wealthy to broke due to a combination of financial mismanagement and excessive spending - but for some unpopular refusals on my father's part they would have dragged my mother down as well.
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Old 04-28-2010, 06:24 AM   #6
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Has anyone talked to the bank? At times I have helped one friend negotiate a short sale and worked out another deal to get a rehab finished. But she has to be deadly realistic.
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Old 04-28-2010, 08:45 AM   #7
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Good replies, thanks.

As for renting the house, she would need to have rental payments equal or nearly equal to the mortgage payments; due to her lack of cash. She doesn't think that is possible, and I suspect she's right. She's also worried about problems with renters and problems with trying to evict someone, if she's living far away.

As for talking to the bank, her story has changed somewhat over the last six months. She has said that the bank doesn't want to talk with her unless she is actually behind in her payments. She has also said she doesn't want anyone in this small town to know how desperate her situation is, otherwise they'll just wait a few months to buy her house on the courthouse steps. Maybe yes, maybe no. Either way, she WILL be behind in her payments very soon and then we'll know how everyone reacts. I've strongly suggested she talk to a real estate attorney so she can know things instead of guessing things.

Martha's idea about the second mortgage is certainly worth some investigation, we can afford to loan her money for payments but won't do so unless we expect, one way or another, to get it back without too much hassle.
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Old 04-28-2010, 09:05 AM   #8
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Having been in both first and second position in foreclosure situations in the last year please be advised that being in second position means you stand to lose big, like everything, if you don't foreclose first. Also found that since the first position lender's position remains inviolate that the time and particulars of the second's foreclosure sale don't have to be disclosed to the first.

Foreclosure in Oregon takes about 6-8 months and may cost $6-10K, which cost will need to be paid as each month's expenses and lawyer fees are incurred.

I am not an attorney, this is per my understanding, and relates only to my experience in Oregon.
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Old 04-28-2010, 09:16 AM   #9
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This sounds like a soap opera. It's sort of sad but she's made it sadder. IMHO she should sell her house now for whatever she can get for it.

She's been staying with friends in DC for six months to look for a job. Those must be some really good friends.
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Old 04-28-2010, 10:15 AM   #10
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My suggestion of a second mortage was not for the purpose of getting a recovery in a foreclosure, but to get paid when the house sells if the house has equity. That is why I suggested the appraisal. Plus that will let her better price the house for sale and to see if it is worth even trying to sell.
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Old 04-28-2010, 10:23 AM   #11
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Good replies, thanks.

She has also said she doesn't want anyone in this small town to know how desperate her situation is, otherwise they'll just wait a few months to buy her house on the courthouse steps..
IMHO this is simply financial denial. If its a small town everyone will already know her situation because of her current actions. The bank will buy the house on the courthouse steps, not the neighbors. She has to go to the bank and insist on talking to someone about the process.
I have had relatives in financial denial. It is never pretty.
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Old 04-28-2010, 10:41 AM   #12
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IMHO this is simply financial denial. If its a small town everyone will already know her situation because of her current actions. The bank will buy the house on the courthouse steps, not the neighbors. She has to go to the bank and insist on talking to someone about the process.
I have had relatives in financial denial. It is never pretty.
She is in denial about many things, or at least thinking that somehow she can keep the bad news a secret.
Our mother was like that, too embarassed to tell the neighbors when I got thrown out of college and when my brother voluntarily withdrew from the Naval Academy.

She hasn't told her adult daughter, nor the realtor, nor the friends she's living with in DC, nor any of her friends in Georgia; about the imminent default.
She gave us siblings some vague information over the last six months, but only produced the details last month.
Her adult daughter came to visit her and the boyfriend during the two weeks she lived with him. She had already decided the guy was a creep and she was moving out, but didn't want to upset her daughter by telling her anything.

The garage is full of antique French furniture that should have some value if sold, but she wants to put it in storage for when she moves somewhere else. She needs to figure out that the rest of her life will probably be spent in a cheap apartment with a female room mate. And she can't afford to pay storage or moving fees anyway.
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Old 04-28-2010, 11:29 AM   #13
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She is in denial about many things, or at least thinking that somehow she can keep the bad news a secret.
Our mother was like that, too embarassed to tell the neighbors when I got thrown out of college and when my brother voluntarily withdrew from the Naval Academy.

She hasn't told her adult daughter, nor the realtor, nor the friends she's living with in DC, nor any of her friends in Georgia; about the imminent default.
She gave us siblings some vague information over the last six months, but only produced the details last month.
Her adult daughter came to visit her and the boyfriend during the two weeks she lived with him. She had already decided the guy was a creep and she was moving out, but didn't want to upset her daughter by telling her anything.

The garage is full of antique French furniture that should have some value if sold, but she wants to put it in storage for when she moves somewhere else. She needs to figure out that the rest of her life will probably be spent in a cheap apartment with a female room mate. And she can't afford to pay storage or moving fees anyway.

Do you have room for her and her antiques? If I were in your shoes, I would tell her that she needs to sell, sell, sell...her antiques that if you decide to help her, it will be based on last resort, her hoarding a garage full of furniture that may have some value is not part of the solution. If I could afford it, I'd consider buying the home for her payoff on her mortgage and letting her stay in the house as a "renter" temporarily until the market improves, then unloading it.
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Old 04-28-2010, 11:39 AM   #14
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The garage is full of antique French furniture that should have some value if sold, but she wants to put it in storage for when she moves somewhere else. She needs to figure out that the rest of her life will probably be spent in a cheap apartment with a female room mate. And she can't afford to pay storage or moving fees anyway.
In my case my "help" was actually selling the equivalent of the furniture (at a good price) and making sure the person got the cash. Sometimes it helps the person get off the dime.

In terms of denial a friend of mine cared for her mother for 11 years on the assurance she would get the family house. Her mother had the paid off mortgage. What she did not know was that her mother had reverse mortgaged the house to provide financial support for her siblings. The sibs got the money and my friend got the shaft. Both were in denial
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Old 04-28-2010, 12:06 PM   #15
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She is in denial about many things, or at least thinking that somehow she can keep the bad news a secret.
She hasn't told her adult daughter, nor the realtor, nor the friends she's living with in DC, nor any of her friends in Georgia; about the imminent default.
She gave us siblings some vague information over the last six months, but only produced the details last month.
From this description, one could form the impression that she only offers the unvarnished truth when she has no other option. And in some cases, especially with the realtor, that practice seems to be working against her.

But I could be misinterpreting the situation.
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Old 04-28-2010, 12:20 PM   #16
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I would consider helping her with the mortgage for 3 months - again, if you can afford it. It sounds like you trust her to pay you back, and although a lot of people here often question that kind of trust, I can understand it, because I would completely trust my sister in that way. Anyway, at least here (in DC) the market is starting to pick up a little, and if it is down there as well, spring is a good time to sell.

I agree she is in denial and needs to get a job ASAP, but at least you can give her some breathing room. I would suggest she talk to an auction house about the furniture.

As an aside, I have an aunt and uncle who don't make much money and don't really have anything saved, and my parents (mom is aunt's sister) have given them (as a gift) money on a few occasions. We don't all agree on how they spend what money they have, but my parents still like to help where they can. Their feeling is "well, they are family...", and luckily, they can afford to do this.

Best of luck to you and your sister.
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Old 04-28-2010, 12:34 PM   #17
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From this description, one could form the impression that she only offers the unvarnished truth when she has no other option. And in some cases, especially with the realtor, that practice seems to be working against her.

But I could be misinterpreting the situation.
You are not misinterpreting the situation.
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Old 04-28-2010, 05:26 PM   #18
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I pay for an independent appraiser to value her house. No point in putting a 2nd mortgage on a place with little or no equity.

I'd also find ebay or antique seller for her in Atlanta. Selling that stuff would be a condition of an financial help.
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Old 04-28-2010, 05:51 PM   #19
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Personally, I would talk with her, offer her advice, go talk to the bank with her, help her fix the house up, do whatever. But no, I would not give her money - in any way, shape, or form.

Maybe I am tainted from years of watching my own sibling make very bad decisions, overspend, quit her job, file bankruptcy (twice). No matter what my parents did to try and help - she found a way to continue making bad decisions. There was always a reason or excuse. Our financial situations are (obviously) very opposite today. Her comment? "I wish somehow had taught me how to save when I was younger" I'm not quite sure what to make of that - because no one taught me either. But I do think if she had been made to deal with her poor decisions earlier, things might have been better. But who knows.... I do know as long as my parents were there to bail her out - she used it.

Personally, I am not sure you are helping your sister by giving her money. I understand your natural inclination to not want her to go hungry - but I would stop there. She has made a number of bad decisions and as long as she has you to fall back on - she will continue to do so.

I did like the statement "Walmart and Burger King should be on her list." - because I was thinking the same thing.

Good Luck - she is lucky to have a sibling who is even willing to think about this.
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Old 04-28-2010, 05:54 PM   #20
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Have you thought of suggesting to her that she returns to France. Since she was married to a French citizen, she should be able to get very generous welfare benefits in France until she can get back on her feet.
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