Son's plan to buy parents' house won't work

Q: My parents own the home that I live in. They would like to sell the property because they need the money. The property is worth at least $300,000.

The only income I currently have is $140 per week in court-ordered child support.

My idea is to ask a bank to give me a mortgage for $230,000. I'd pay my parents $200,000, or something like that, so that they can have most of the cash value, but the bank will have some equity/collateral as an incentive to give me the loan.

I can then use the extra $30,000 to pay the mortgage (which would be about $1,600 per month) until I get back on my feet financially or I sell the property.

Is there any jargon or terms I can study up on, and does this sound possible, or can you make any recommendations?

A: This sounds like a good idea, but in reality, few if any banks will give you a loan with an income of $140 per week. That's an income of $7,280 per year. A 30-year fixed-rate $230,000 loan at 6 percent would cost you $1,378 per month, and that doesn't include an escrow for real estate property taxes and homeowners insurance premiums.

You would need to have an income of maybe $100,000 in order to afford a home that costs $300,000 or you would have to have significant other assets to give the bank a reason to give you a loan.

If you are looking for a place to live and your parents can't wait to sell their home, you should plan to move out of your parents' house and into an inexpensive rental. With the cash they get from the sale, perhaps they can help you pay for your rent until you're back on your feet financially.

I don't know what your credit history or credit score looks like, but these days, lenders are looking for a credit score of at least 680. Please visit AnnualCreditReport.com and pull a copy of your credit history. You can then pay around $7 for a copy of an Equifax credit score, which is the one closest to what mortgage lenders use.

If your credit score isn't at least 680, then you should take the next year or two to work on rebuilding your financial life: Find a job, rent an apartment, start saving the 5 or 10 percent you'll need for a down payment, plus extra for reserves, and work on cleaning up your credit history.

Once you've started your new job, rebuilt your credit history and raised your credit score, you can start looking for a house to buy.

If your parents want to wait a couple of years before they sell their home, you might be in better shape at that time -- with a new job and a high credit score -- to buy the home from your parents.

Good luck.

Q: I read your column in my local newspaper probably nine of every 10 Sundays. I have never yet seen anything positive about real estate agents. I don't know if this is your calling or not. However, you are not accurately portraying the industry or instilling any trust whatsoever in the one of the biggest engines of our economy.

The real estate industry has dishonest people and those that provide substandard or illegal service. So do doctors, lawyers, newspaper columnists, reporters, CEOs -- they're in every industry out there.

If I were a layman buyer or seller in real estate, I would think by reading your articles that there is nothing good about the industry or the workers within it. I know you receive positive questions and chronicles from happy and well-served consumers; nonetheless, you never seem to choose them for your column.

A recent article is unbelievable. The seller you describe is the one of the most unreasonable customers I have ever heard of. Any right-minded agent would either not take or discontinue service to an individual like this. Practically any broker that investigated this complaint, which you say is the course of action to take, would ask this seller to find someone else to serve that individual. Reading between the lines, the home is probably overpriced and the seller has so alienated himself/herself from their best asset, the Realtor.

Nevertheless, I saw no commentary in your article as to how unreasonable that person is conducting himself/herself.

I've been very successful in real estate for nearly nine years, never had even the first legal issue, and have a large group of very happy past and current clients.

My suggestion to you is to get real about real estate and be fair and balanced in your approach. Everyone, including you, will be the beneficiary.

A: Thanks for taking the time to write.

I have actually written many times about how well real estate agents work for many types of buyers and sellers. In all of my books for home buyers, I recommend that buyers use a good, knowledgeable agent to purchase property. For sellers, I tend to think that most will be better served by using a great real estate agent than going it alone -- particularly in troubled times.

While I receive thousands of questions from people each year, I don't hear that often from folks who are delighted and have had a trouble-free home buying or selling experience. As it happens, most folks with questions about their transactions are in trouble. They have questions about agents who don't understand them or do right by them, or who have had, for one reason or another, an unfortunate experience. I do choose what I feel is a representative sampling of questions from those that come into my mailbox.

You are right there are many great real estate agents out there and people should look for those agents. When they have a bad experience with an agent, they have questions about how to fix the situation. These experiences and questions from readers educate other buyers and sellers as to what to expect from their real estate agents.

From what I've seen, I also think that many real estate agents in the business today have never seen the type of slowdown we're currently enjoying. Some agents are used to selling quickly and easily, pocketing their commissions and moving on. Agents who have been in the real estate business for 25 years or longer have seen down times as well as good times. They have the longevity to understand that real estate is a cyclical business and sometimes it just takes months to sell a house.

The truth is there are "bridezilla" sellers who are unreasonable about what they want when they sell their homes, and there are "bridezilla" buyers who are unreasonable about what they should pay for a home. There are also "bridezilla" agents who behave badly, give poor advice and disappear when the going gets tough.

For a large portion of the real estate transactions around the country, real estate agents and their clients communicate and interact well, thank each other for their professional behavior, and walk away satisfied from their deals. But there are still a good number of problems in the industry, and I'd like to see better interaction between agents and their customers, as I think it would certainly help everyone.

In the meantime, I'll continue to call it as I see it. Thanks for reading the column.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

***

What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.

All rights reserved. This article may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of Inman News. Use of this article without permission is a violation of federal copyright law.