Home Buying in Minnetonka>Question Details

Mike Heraty, Real Estate Pro in Pagosa Springs, CO

How to help a parent financially buy a condo.?

Asked by Mike Heraty, Pagosa Springs, CO Sat Jul 9, 2011

My brother & I would like to help our 84-yr old mom downsize a larger home (appraised at $350k) to purchase a condo for aprox $375k. She doesn't have the resources but we can help. She reversed mortgaged about $150k leaving her w/aprox $200 in equity. She has very little savings. We can make up the difference & help her with the very high monthly association fees ($750/myth) & wrote a family contract for reimbursement when she passes or needs another living situation. My question is - does it make more sense to have her gift her home to my brother, he purchases the condo & rents it back to her (thus he has the tax benefit of a rental) & we pick up the monthly association fees? It makes sense to me but I might be missing something. I know I will contact an estate/tax attorney but I am trying to get some ideas before I get into fees with professionals. With so many of us in this situation, I thought input my give me better questions to ask before I start occurring legal fees.Thanks!

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I would run this scenario past an attorney that practices 'elder law'. In your posting you said your mother has very little assets. If in the future she would need state assistance (moving into assisted living / nursing home) the county where she resides will look back upwards of five years for any asset transfers and if it's deemed they were inappropriate they could deny aide or force the parties that received the assets to return them. We had a similar situation in our family where our mother inherited a large sum of money. Fortunately she consulted a local attorney who advised her not to give away the money in case she needed to be moved to assisted living (as she wouldn't have had assets to pay for assisted living - like 60 percent of those in a similar situation).
1 vote Thank Flag Link Sat Jul 9, 2011
I'm glad you and your brother want to help your mother. I had a similar situation 10 years ago except my mother had only $10K equity. I bought her house from her at the appraised value using a new mortgage and she lived there rent-free. It qualified as my second home so I got those tax breaks. The rental value (even though it wasn't paid) plus the additional financial assistance I gave her meant she qualified as my dependent on my tax returns. In the end, this housing arrangement cost me about $60K due to the market decline, remodeling/repairs, and lack of rent payments. But I have never regretted it.

One advantage of not having the condo title in your mother's name is that you don't have to deal with the Medicaid look-back period should your mother need those services later. If neither you nor your brother will be living nearby, you might want to consider a condo or apartment in one of the developments that provide "aging in place" services.

Please inquire further about why the HOA fees are so high. I can think of several condos in great locations with fees in that range and it's because the HOA is in financial trouble.

You are facing some tough decisions. I wish you and your family the best.
Web Reference: http://www.rebeccalaw.net
1 vote Thank Flag Link Sat Jul 9, 2011
You will want to look are the from numerous perspectives. From a mortgage perspective your brother is better off as a non-occupying co-mortgagor (co-signer) because that keeps the loan program Owner Occupied versus Non-owner occupied, with rates about .375 to .5% better. Your estate attorney can indicate if there are advantages to having the property out of her estate and what the applicable "look back" periods will be for a gift. But from a strictly mortgage perspective you most likely better off keeping the occupant (your mom) on the loan if possible.

Peter Boyle
0 votes Thank Flag Link Sat Jul 9, 2011
You should also run this by a financial planner before going to the attorney. Most will help you at a lesser cost and frankly many know more on the financial side of things then attorneys. At least in my experience.

0 votes Thank Flag Link Sat Jul 9, 2011
First of all; it sends shudders down my spine to think of paying $750 per month for the HOA!!!
I'm not strong on HOA's to bein with; but $750?!

Understanding that I am not an Attorney, nor am I a CPA;
I would buy the (house) myself and just let her live in it: Then, if and when, you don't have to worry about inheritance taxes, probate, or any of that stuff.
I would keep it simple.

Good luck and may God bless
0 votes Thank Flag Link Sat Jul 9, 2011
Please Talk to an accountant, also you can try "like kind" transfer giving you mother title to the new home that you brother purchases and he would receive the old home, which he could sell at his leisure to gain back his investments!
0 votes Thank Flag Link Sat Jul 9, 2011
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