Should we help my deadbeat father out of foreclosure trouble?

[mrstop]

He may not go for this but...

Buy the house if you can get favorable terms from the bank and offer Dad a second mortgage (in an amount that makes sense to you) if he would move to an apartment so you can rent it to a third party. That would provide Dad some extra income and he would be out of "your" house. That assumes that there is a vibrant home rental market in your area and the deal pencils out.

This sounds like a great idea. If I understand you correctly, I would purchase the property by paying off the mortgage debt of $75,000 cash/loan and a mortgage note from my father for let's say $100,000. I could then pay him the mortgage of $421.60 per month to offset his living expenses until the property sells at which point I would pay him the remaining balance on the loan (and put aside the remaining profit for his inevitable rainy day).

 

[mrstop]

It is very unlikely that the bank would allow a short-sale to a son. Most of the short-sale programs do not permit this because this is not considered and "arm's length" transaction. However, I've been out of the business for about a year and a half now, so it's possible the rules have changed.

He has already negotiated down the payoff on the loans. It would take a leap of faith and trust on my part, but could I payoff the loans in cash (directly to the bank) to settle the debt then transfer the title afterwards?

 

[MissMolly]

He has already negotiated down the payoff on the loans. It would take a leap of faith and trust on my part, but could I payoff the loans in cash (directly to the bank) to settle the debt then transfer the title afterwards?

Well, I am certainly no financial expert, but wouldn't you be entering into the world of gift taxes at that point? Your father would then be signing over a free and clear house, correct? Also, although I doubt the bank/mortgage company would follow-up, what you are suggesting is actually fraud.

 

[ChiliPepr]

i doubt you will be able to buy the house for less than 150k. Banks do not allow short sales unless the are "arms-length". They probable will not let a family member buy it on the cheap.

 

[tryan]

The foreclosing will be a net positive to him (minus a bunch of penalties, fees ...). Then he'ld HAVE to move beyond this problem.

While it might be nice to get the bank to EAT some of the fees via a purchase ... I wouldn't step into this mess.

 

[mrstop]

Well, I am certainly no financial expert, but wouldn't you be entering into the world of gift taxes at that point? Your father would then be signing over a free and clear house, correct? Also, although I doubt the bank/mortgage company would follow-up, what you are suggesting is actually fraud.

i doubt you will be able to buy the house for less than 150k. Banks do not allow short sales unless the are "arms-length". They probable will not let a family member buy it on the cheap.

I was figuring there would be some gift tax involved, along with capital gains on my side when I sell. I didn't consider the "arms length" issue. You definitely raise some good points as I don't want to make his legal issues my legal issues!

If this is all true, it looks like there is really no safe alternative to help him out. I guess I could payoff the full mortgage amount, but that doesn't give me a lot of wiggle room to dump the property quickly and at that point he would be better off selling on his own as a fire sale if he would do so.

The foreclosing will be a net positive to him (minus a bunch of penalties, fees ...). Then he'ld HAVE to move beyond this problem.

While it might be nice to get the bank to EAT some of the fees via a purchase ... I wouldn't step into this mess.

You're absolutely right. We have told this to him, which he obviously didn't want to hear.

 

[modhatter]

i doubt you will be able to buy the house for less than 150k. Banks do not allow short sales unless the are "arms-length". They probable will not let a family member buy it on the cheap.

This is what I said earlier. The bank can't sell the property without your fathers approval until after they foreclose. This will take place on the courtroom steps, where other investors will be able to bid along with the mortgage holder. The longer the foreclosure goes the more fees, back interest, etc. will accumulate. It is a pity your father won't sell the house.

You can't help feel sorry for him for wanting to hold on. Not a good place to be at 67. On another note, if they do foreclose, and your father has no other assets, he can get Medicaid and perhaps qualify for help in an assisted living. Every state is different I think. I am only familiar with Florida. They have a program called the Diversion Program, which will pay a certain amount towards an assisted living facility. $1,000 to 1,100 a month. If you are a vet, you are eligible for another subsidy which pays about another $1,000. The assisted living takes most of your dad's social security, and the other subsidies. However, he has a secure roof over his head, three hot meals a day, women, and entertainment. Not bad for someone who is totally busted.

Just something for you to think about.

 

[Free To Canoe]

I have know several people like this. They want help, but they want it on their own terms. There's the problem. You end up being an enabler.

+1 I am guessing that you will never get the control of the house. It is all about the control.

I bet most families have a situation like this. Best to focus on the parts of life where you can influence the outcome. How is Mom doing?

 

[Nords]

I wouldn't say I am not inclined to help him, as I do. I am really wrestling with this as he does not have a good track record of making the best decisions. I don't want to help him in a way that either enables his behavior, prolongs what will inevitably happen, or put my families finances in jeopardy.
If we were to support his living arrangements (which may ultimately have t happen), it would be in a better and more affordable environment.

If this is all true, it looks like there is really no safe alternative to help him out.
You're absolutely right. We have told this to him, which he obviously didn't want to hear.

Sounds like you're answering your own questions. The only real "help" that you can offer is to leave him alone to work out his own problems. Or, as is perhaps more likely, to find some [-]generous woman[/-] other person to help him work them out.

 

[justplainbll]

I understand your desire to help out your dad. Buying the property, charging a market rate rental and taking unpaid rent and expenses such as insurance and taxes, and depreciation as tax losses might be a way to go.

 

[travelover]

You need to face the fact that this is a mental illness. You really can't fix it.

Take case of yourself and immediate family.

 

[ducky911]

I am sure the bank would not sell the house to you for 75 k or any amount. Banks must have some rules to get goverment funding. I have bought two short sales and there is a form that is filled out saying that i am not related to the seller.

 

[MissMolly]

This is what I said earlier. The bank can't sell the property without your fathers approval until after they foreclose. This will take place on the courtroom steps, where other investors will be able to bid along with the mortgage holder. The longer the foreclosure goes the more fees, back interest, etc. will accumulate. It is a pity your father won't sell the house.

You can't help feel sorry for him for wanting to hold on. Not a good place to be at 67. On another note, if they do foreclose, and your father has no other assets, he can get Medicaid and perhaps qualify for help in an assisted living. Every state is different I think. I am only familiar with Florida. They have a program called the Diversion Program, which will pay a certain amount towards an assisted living facility. $1,000 to 1,100 a month. If you are a vet, you are eligible for another subsidy which pays about another $1,000. The assisted living takes most of your dad's social security, and the other subsidies. However, he has a secure roof over his head, three hot meals a day, women, and entertainment. Not bad for someone who is totally busted.

Just something for you to think about.

The OP stated his father was physically and mentally capable of holding a job. Perhaps FL is different, but it's my understanding the Medicaid is not going to jump in to provide him free room and board unless he is incapable of performing at least two of the five Activities of Daily Living (ADL). That doesn't appear to be the case here.

 

[modhatter]

The OP stated his father was physically and mentally capable of holding a job. Perhaps FL is different, but it's my understanding the Medicaid is not going to jump in to provide him free room and board unless he is incapable of performing at least two of the five Activities of Daily Living (ADL). That doesn't appear to be the case here.

Yes, your right. I forgot about that. Well he may qualify in the future.
Good point.

 

[East Texas]

What if this was the scenario?

Read it this way and see if you would still feel an obligation to help someone who (1) doesn't want to help himself and (2) jeopardize your own financial future. I'm going to be a bit more cold-hearted than some of you - I just don't understand why there is a real or perceived obligation in this situation. No matter what the bail-out, the ship will still sink and take everyone down with it.

Background
My [-]father's [/-]friend's property is about to go into foreclosure. His mortgage debt is about $150,000 which he has negotiated down to about $75,000. The value of the property is probably between $200 and $270,000.

My [-]father[/-] friend (age 67) has no savings and lives on minimal social security. He does have some rental income from the property which helps to offset the mortgage but still results in a considerable loss each month. He is mentally and physically capable of having a job, but it is not something that he chooses to aggressively pursue.

Since he hasn't had any stable income since the early 1970's, he has lived via playing in financial spiral versus within his means (although it is more like Sanford & Sons). He has borrowed against the property along with credit cards to survive. Using one loan to pay another. In addition, he has no track record of payoff anyone he has ever borrowed (even his brother). Whenever he does have any money, it goes towards things other than his real obligations. He rationalizes it, because everyone can 'afford it."

My brother and I have been telling him to sell the property for over 10-years. Unfortunately, it was tied to one of his failed get rich scheme's and is emotionally tied to the property.

With the pending loss of the property, he finally put the property for sale last fall for $275,000. However, he has not been aggressive in selling it and even turned down an offer for close to what he was asking. Other things he has said to us indicates that he has no urgency in selling either. the property is in a soft "resort" market, so it's also a little more difficult to sell.
[-]
He has been only marginally involved in my brother's an my life. My parents divorced in 1977 and was involved and visited when convenient. As you can imagine from his track record he was less than helpful in providing financial support to my mother.
[/-]
His request for help
My rational side says, he made his bed let him lie in it. Despite this, I feel some [-]biological[/-] obligation to help out. My brother and I have lived our lives very differently and do have means to help, but would put our long term strategy in jeopardy.

He has applied for mortgage to pay off the $75,000 negotiated amount. True to form he actually asked for $100,000. The bank has requested him to get a cosigner and he has requested my brother and I help by cosigning the loan. Cosigning is definitely not an option. There is really no way I would co-sign for anyone given the risk. Since my [-]father[/-] friend has been pretty much a deadbeat his whole life (harsh but true) we are even less interested. We have told him this, but it resulted in a shouting match with him.

He obviously is not willing to do the right thing and price the property to sell quickly. Even if he did sell it in time, he would quickly burn through the money on junk rather than save it for when he needs it.

Alternative way to help
Outside of letting things happen as they should, I have been thinking about helping in a way "force him to do the right thing." This is to get him out of trouble out of the property, and save some of the equity to supplement his income and provide some safety.

My thoughts are to:

1. Buy the property under market for the $75,000 he has negotiated
2. Have him move out of the property into something that he can afford
3. Price and sell the property for a quick sale
4. Use the equity (after taxes, expenses, and some reasonable return for our time) to
   • put into a trust or investment account that would payout 3-4% per year
   • payoff other non-secured debts (which he has no intention of repaying)

[-]There will most likely be some obvious tax implications for him (gift) and us (capital gains). We'll definitely need a tax/estate attorney's help in the transaction (another cost we'll incur)[/-]

My questions

Should my brother and I help him? Or, given that he's a grown man and his situation is the result of his own actions, should we just let him lose the equity [-](which would help to reduce the inevitable future burden to my brother and I)[/-]?

1. What do you think of our possible solution to help? Are there other options which minimizes our risk while helping out?

Your father is a grown man making grown man decisions for which you have absolutely no responsibility. I don't see a problem with saying "I can't help you." And that's your mantra. Family of birth. Family of choice. Sometimes family of birth is not our family of choice. It's tough love time. He's never going to change.

 

[Ally]

Given his track record and lack of self-discipline, I don't think you will change him or his behavior. If you rescue him, he probably won't appreciate what you've done. I think you should think about your own family first and not feel obligated to help. If you decide to help, treat it as a gift that you have no expectations of a return from him emotionally or monetarily.

 

[Buckeye]

I don't see any upside for anyone in this. You buy "his" house for $75,000 and Dad's going to say you took his equity. You sell it and he has no where to live. You set up a trust that will give him 3-4% per year...he still has no where to live and the trust distribution won't be enough money to live on, and oh yes...you took his equity. You let him "rent" the property from you and...he doesn't make payments. You, as owner, will be responsible for upkeep (M&R, taxes, etc.) on the house and if he doesn't pay rent, you have the option of booting Dad out of "his" house.

+1

 

[Lisa99]

Seriously?

If Dad were losing his house because an illness wiped him out or even if he had made an all too common mistake like giving a scam artist much of his money I would help in a second. However your father has a long history of bad judgement in the money department.

If it were me I wouldn't give him a penny but you need to do whatever makes you feel right regardless of what anyone else thinks.

 

[Helen]

The only real "help" that you can offer is to leave him alone to work out his own problems.

I have to agree with this. He's dug himself in too far and there are no good options left.

 

[Texas Proud]

I am in the 'let him figure it out' camp....

Or the 'you can't fix stupid' camp...

But I think they overlap a lot here....



He had a way out... by selling the property... he let that one go... how stupid is that.... I will not waste my time or money on someone like him....

 

[obgyn65]

I agree with Ally.

Given his track record and lack of self-discipline, I don't think you will change him or his behavior. If you rescue him, he probably won't appreciate what you've done. I think you should think about your own family first and not feel obligated to help. If you decide to help, treat it as a gift that you have no expectations of a return from him emotionally or monetarily.

 

[houstenh]

Another +1 for Ally.

 

[MichaelB]

This is a tough group. Maybe Mrstop senior has a problem with his wiring and just cannot make the "right" choices in life. I would not advise OP Mrstop to enable or subsidize his father in any way, and it is not clear his father would even cooperate with any of the options being discussed here. But if his were my situation I would try go get the $100k equity out of the house, help the Mrstop senior get into a senior home of some type, and use that money to help support him. It is possible Mrstop senior will not (or can not) cooperate and end up losing everything.

I would also contact county health and senior care departments to see what support programs are available. Housing options as well, because Mrstop senior will soon be homeless and need a place to stay.

 

[marko]

I 'know' this type of guy.

He's spent his entire life jumping from one scam to another and has made it work thru wile, deceit and denial.

Nowhere in the OP's original message do I see dad making a serious plea for help other than for them to co-sign. All I see is another way to keep the scam going for a few more years until another idea comes along.

Been there. Done that.

Don't want to be harsh, so I'll say this: the ol' man did you a favor by keeping his distance. Read into it what you wish.

Good Luck!

 

[Walt34]

I'm with Ally and the other "tough love" campers.

We have a similar issue with FIL, five years ago I spent 7 months and not inconsiderable expense doing major painting and mold removal on his house so he could sell and get into a situation financially sustainable.

Then he decides he "can't move".

Okay, fine. I'm done with it.