My in-laws helped my wife and me purchase a home that we all live in, including my teenager. They provided $300,000, and we bought the home for just over $500,000. All four of us — my wife and I and my in-laws — are on the deed and the loan. I am currently paying the mortgage. We live in an equitable-distribution state.
My in-laws now want me and my wife to sign a document stating that, should we sell the house at any time, now or in the future, whether they are alive or dead, we will give a fixed amount of $125,000 of the initial proceeds to their adult granddaughter — our niece — who lives in another state. This will reduce their investment in the home to $175,000.
I said we could not sign this because it effectively constitutes a legal claim, a lien on the property, similar to that of a lender. Such a claim can be filed with the county and can harm attempts at refinancing or obtaining a home-equity line of credit that might be needed for improvements and repairs. I said we could maybe work out a percentage, after costs, etc., to disburse if we sell, but no fixed lien.
They got angry and they’re threatening to go to a lawyer. This is causing problems at home. This agreement would also take a lot of equity away from me and my wife. The in-laws think this is a fair way for them to get their initial investment back and to do what they want with it. Our home is now worth $720,000. What should we do?
Husband and Son-in-Law
Don’t sign anything.
Types of ownership vary by state, but you either have joint tenancy with the right of survivorship or you are tenants in common. Joint tenancy with the right of survivorship gives all owners an equal share of the property and does not allow one owner to add another person to the deed — and, importantly, if one owner dies, their share of the property goes to the other owners. If you are tenants in common, however, you would not have the right of survivorship in the event that your in-laws predecease you.
Generally, unless the deed says otherwise, tenants in common have an equal interest in the property, so it sounds as if each of the four parties on the deed owns 25% of the house, says…