Pitfalls of buying inlaws home
Minnestoa, USA!
TLDR: wife has parents who want her to buy the house (possibly at the remaining mortgage value rather than market rate, wife has 2 siblings that likley cant even get on a mortgage. thinking over implications of buying the house without sibling involvement and how to deal with being effectivley gifted all of the equity in the house by virtue of buying below market rate.
Me and my wife have been approached a few times about buying my wifes parents house from them. There are a number of immediate issues I could think of so mostly brushed it off. They have been asking again as they are in the process or getting an elder law attorney to help them with end of life stuff etc. (they are not end of life yet but the father is going through a lot of cancer treatment, not curable but its not a fast moving cancer) and they are worried they will lose the house if they have to go into some kind of care facility. This has made us dive deeper into what a purchase would look like.
Because we would effectively be renting the house back to them we cannot assume their existing mortgage. The property being a rental has other increased cost implications (renters insurance etc) there are a number of things that would mean we would likely be out of pocket to cover increased costs and taxes as they are on somewhat of a fixed income and we wouldn't want to increase their cost burden too much more than it already is.
one way I look at this is to buy the house at the amount they have left on the mortgage rather than the assessed value (this is approx 200k equity in the property that would be treated as a gift). This is the only way this would be affordable for me and my wife.
This is all good and well but my wife has two siblings.
They have a "strained" relationship with the parents that my wife does not and even if I wanted to buy the house as a joint venture (which i do not) I don't believe they could get a mortgage under their names (past bankruptcies etc) I would not trust them to maintain their share of payment or any unexpected costs/repairs.
I've told my wife that if we take this on alone then we take all risk and i would not really be willing to give them any of the benefit (equity) if we were to sell the house in the future. this is the rub, because my wife thinks my parents may want them to get some equity if we do sell.
The funny part about this is that the parents have said a few times that if they would give my wife the lions share of any inheritance when they pass and I believe they are serious, which could case friction down the line.
I also want to point out that there is no inheritance from the parents, the house is the only thing that has equity in it and only if they sold it at market rate.
what has been the experience from those of you who have dealt with this kind of situation? could the gifted equity be disputed later even if we have full transparency in the house purchase process?