Our family is currently in a bit of dispute over the future of my mother's home (she is still living).
I apologize if my explanation here is more complicated than it needs to be; I have simplified the numbers so the math makes more sense to me.
We are trying to understand if the agreements below are fair and balanced to all parties.
- My sister and her husband purchased a foreclosed house for $60,000 that was valued at $120,000
- They held the house for a year and then sold the house to my mother for $60,000, 50% of it's market value.
- Per a now contested verbal agreement, they sold the house to my mother at a market loss of 50% with the understanding that they would receive 50% of the sale amount of the house after my mother's death
- My sister and her husband have the first option to purchase the home at the current market value, minus 50% (due to the initial loss they took by selling to my mother instead of on the free market)
- After purchasing the home from my sister, my mother has spent around $30,000 to finish the basement and add other improvements to the home and land.
- Bottom line: when the home is sold, 50% of the sale price will be given to my sister and her husband while the other 50% is split evenly among all 4 heirs (including my sister) as our inheritance.
With the understanding that they purchased the house for the sole purpose of selling it to my mother a year later (and never intended to flip it for profit at the time), is this a fairly standard and fair agreement?
How do we factor in the $30,000 that my mother spent to improve the home?
It should also be noted that when the original verbal agreement was made, my mother made it clear that she did not fully understand it and asked that it be put in writing. This was never done and now memories are failing us and we are just trying to come to a fair written agreement now.
While we understand the legal rights my mother has to simply have the full home value divided evenly among all her heirs, we want to know if my sister and her husband's vision is a fair one.
- My mother passes in 10 years and the home now has a market value of $200,000
- My sister and her husband decide to purchase the home from the heirs for 50% of the value.
- They pay the remaining $100,000 of the sale price to each of my mother's 4 heirs, with each receiving $25,000 (including my sister)