Borrowing money on Inherited house?

[2HOTinPHX]

Unfortunately we lost both our parents in the last 6 months. We 4 siblings inherited equal shares in the family home. Its in the SF Bay Area so the value pretty high and none of us can afford to buy the others out. So we had decided to go ahead and sell it. Everything has been delayed due to the Corona virus. At this point probably wont put the house on the market till later this year or early next year. The house was moved to a trust in our names. We have been discussing taking a small loan of around 125000 out to distribute and build up everyone's emergency funds during these scary times. We would leave 25000 or so to pay the loan till the house is sold. We're wondering best way to go about it? Any suggestions?

 

[luckydude]

Unfortunately we lost both our parents in the last 6 months. We 4 siblings inherited equal shares in the family home. Its in the SF Bay Area so the value pretty high and none of us can afford to buy the others out. So we had decided to go ahead and sell it. Everything has been delayed due to the Corona virus. At this point probably wont put the house on the market till later this year or early next year. The house was moved to a trust in our names. We have been discussing taking a small loan of around 125000 out to distribute and build up everyone's emergency funds during these scary times. We would leave 25000 or so to pay the loan till the house is sold. We're wondering best way to go about it? Any suggestions?

Sorry for your loss.

IMO the loan is a bad idea. What if the house takes longer to sell and the $25,000 earmarked for loan repayment runs out? Will each of the siblings then agree to pony up 1/4 of the repayment at that point? What if one of them refuses/can't pay for whatever reason? What if the remaining siblings can't cover for that person and the loan becomes delinquent? That could create resentment and conflicts among the siblings. How urgently is the $25k needed for emergency fund and is that relatively small amount worth all these risks?

Each person's situation/risk tolerance is different, of course, but my rule is: I never get involved in money matters with family or friends. I don't borrow from them, I don't loan them money, and I would never co-sign a loan for or with other people where I have to depend on them to fulfill their financial obligations, and if they don't, I could potentially on the hook. One could easily end up not only losing money but destroying relationships. To me, it's just not worth the risk.

Lucky Dude

 

[2HOTinPHX]

Thank you very much for your reply. I tend to look at things with rosey colored glasses. I didn't even think of all those things that could go wrong. Especially with family...LOL. You are so right on....again thank you!!!!

 

[jollystomper]

Sorry for your loss.

IMO the loan is a bad idea. What if the house takes longer to sell and the $25,000 earmarked for loan repayment runs out? Will each of the siblings then agree to pony up 1/4 of the repayment at that point? What if one of them refuses/can't pay for whatever reason? What if the remaining siblings can't cover for that person and the loan becomes delinquent? That could create resentment and conflicts among the siblings. How urgently is the $25k needed for emergency fund and is that relatively small amount worth all these risks?

Each person's situation/risk tolerance is different, of course, but my rule is: I never get involved in money matters with family or friends. I don't borrow from them, I don't loan them money, and I would never co-sign a loan for or with other people where I have to depend on them to fulfill their financial obligations, and if they don't, I could potentially on the hook. One could easily end up not only losing money but destroying relationships. To me, it's just not worth the risk.

Lucky Dude

+1. What he said!

Better to look at ones income and expenses and figure out how to increase income and/or reduce expenses to build up emergency funds than taking out a loan on a situation where so many things could go wrong and create issues among your siblings.

My siblings and I were in a similar situation when our mother died in 2014. Though we stood to make a large profit on the house (even when divided 7 ways), we took our time and did not put the house on the market for 3 years. We all contributed to any maintenance it needed (relatively little) during that time - spread among 7 folks it had very low impact.

IMHO better to be patient than to deal with the loan and the entanglements that could bring along.

 

[2HOTinPHX]

Thanks for the input and sharing your story. We all have ok emergency funds in place. I think I am in super sensitive panic mode with Corona virus happening (actually had a case reported in our office here in Phoenix Sunday night. Thankfully I work from home most of the time) and thinking everyone would love to have even more money in the bank in case of job losses as things get worse. But some siblings seem to think they will be OK no matter what.

 

[jkern]

You probably still can sell it now even with the coronavirus/shutdown going on. I live in the Bay Area and I've seen multiple houses in my neighborhood go on the market, go pending and close over the last month. Most of them go pending in about 1 week.

 

[OldShooter]

I think you would have a tough time finding a lender for such a small amount, short term. Also, liability is almost certainly to be "joint and several" which means that in a default they will only go after the sibling who looks like he/she has the most assets.

 

[2HOTinPHX]

You probably still can sell it now even with the coronavirus/shutdown going on. I live in the Bay Area and I've seen multiple houses in my neighborhood go on the market, go pending and close over the last month. Most of them go pending in about 1 week.

Thanks for the reply. Unfortunately we still have thru sort thru Parents belongings...we planned to do that earlier this month but two us had to cancel travel plans from Phoenix dues to corona virus concerns. We are luck to have one sibling who has been living in home for a few years with parents so the house is not sitting vacant.

 

[2HOTinPHX]

I think you would have a tough time finding a lender for such a small amount, short term. Also, liability is almost certainly to be "joint and several" which means that in a default they will only go after the sibling who looks like he/she has the most assets.

Thank for the info...we are going to give up on the loan idea. Sounds like it would complicate our lives more than help.