Fittest loser
Article posted: 8/17/2013 12:30 AM

With jointly owned property, does majority rule?

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By Edith Lank

Q. Two of my cousins and I own a house. I want to sell and so does one of my cousins. The other one wants to keep it. So what happens? Does majority rule?

A. Every owner must sign the deed selling a parcel of real estate. Or, you could go to court and sue for "partition" of the property. That means forcing a sale at public auction and division of the proceeds. Problem is, you have legal costs, the successful bidder must pay cash and such a sale doesn't usually yield anything like real market value. One lawyer told me it's "like foreclosing on yourself."

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Perhaps a letter from your attorney, mentioning that possibility, would be enough to persuade your other cousin to agree to a sale on the open market.

Have you thought about professional mediation? Mediators would contact the reluctant cousin and try to persuade that person to sit down and talk the problem over. That's more pleasant than legal action, and less expensive -- when it works.

Q. My husband and I needed medical help years ago and applied for a reverse mortgage. I did not want it but there was no place to turn. Now I am a widow, 70-plus years of age and worry about leaving my family members to sell the home some day with perhaps complications of the financial charges listed on the mortgage report I am enclosing. You can see that the debt is mounting up and soon the bank will own my home.

I love the peace of country living and would like to stay in my own home as long as I can. But perhaps I should sell right now while my home is worth more than I owe on the mortgage. If I stay, what additional money would my family have to pay? I do know I can stay in the house till I die but they don't tell you what happens after that.

A. First off, a reverse mortgage was perfect for the kind of emergency you faced. Second, the bank will never own your home. As with any mortgage, all they own is a financial claim against it.

That mortgage statement makes it clear you are being charged every month for mortgage insurance. (Of course you don't actually make any payments; the debt just piles up.) That insurance means you and your heirs won't have the problems you're worrying about. Here's how it works:

When you -- or eventually your heirs -- sell the house, there are two possibilities. Perhaps the sale brings enough to pay off the accumulated debt with something left over. As with any other sale, the remainder belongs to the owner -- you or the kids.

Or -- and this is the part you're worried about -- let's say that by then the debt has grown larger than the sale price of the house. In that case, again no problem. That mortgage insurance you've been paying for will make up the difference. Neither you nor your heirs would be liable for any shortfall. (Note: This is not how all mortgage insurance works, but it's true of an HECM reverse mortgage like yours.)

In short -- you can relax and enjoy the peace of country living. There's nothing to worry about.

Q. We own a home valued by real estate people at $199,999 and we are looking at a new home for $240,000. Our financial planner wants us to take a 30-year mortgage for $240,000 and then invest the $200,000 we get for our present house. We're both retired in our 60s, and we've worked to pay off this mortgage -- our last payment will be Sept. 15.

Does this make sense or should we put the sale proceeds into our new home and take out a 10- year loan for just $40,000?

A. First off, nobody will lend you $240,000 on a $240,000 property. Either you misunderstood your financial planner or he doesn't know what he's talking about.

I don't know whether you've had a profitable, long-standing relationship with him and trust his judgment. Nor do I know what investments he is suggesting, and -- most important -- whether he will collect a commission on whatever you buy. You can come right out and ask him about that.

I don't know anything about your other assets, your prospective retirement income or your tolerance for risk. Nor -- for that matter -- am I qualified to give financial planning advice. But as you wrote to me, it's clear you're uncertain about those recommendations. I do think I'm allowed to tell you this much -- don't do anything you feel uncomfortable about.

And congratulations! Do have an old-fashioned mortgage-burning party to celebrate that final payment in September!

• Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.

2013, Creators Syndicate Inc.

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